Cathie Wood is a growth investor, but it's not always a "buy high, sell higher" mindset for the co-founder, CEO, and money manager for the Ark Invest family of aggressive growth exchange-traded funds. She often finds herself buying the dip when some of her positions fall out of favor.
Shares of Toast (TOST 3.42%), Ginkgo Bioworks (DNA 10.60%), and Robinhood Markets (HOOD 4.44%) tumbled 14%, 3%, and 14% respectively on Wednesday. She still added to all three holdings. Let's take a closer look.
Toast
Wood was adding to her Toast position on Monday, the day before it posted its third-quarter results. After the seeing the shares shoot higher after its second-quarter update in August, she was probably banking on another well-received performance for the provider of payments processing and other tech solutions for the restaurant industry. It proved to be more a case of indigestion than a savory course.
The third quarter itself was in line with expectations. Gross payment volume rose 34% to $33.7 billion, and annual recurring revenue surged 40%. Guidance was problematic, unfortunately. Toast sees $1 billion to $1.03 billion in revenue for the holiday quarter. Analysts were perched at the top of that range. Its outlook calls for $5 million to $15 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), less than half the $35 million it served up in the third quarter. The stock would go on to suffer a 14% hit on Wednesday, but Wood was a buyer in the deluge.
Image source: Getty Images.
Toast is still growing its business at a brisk pace. Its guidance translates to a year-over-year increase of 30% to 34% for the new quarter, modest deceleration from the 37% top-line gain it just posted in this week's update. It added another 6,500 eatery locations to its network during the quarter. Investors are worried about the deteriorating adjusted EBITDA.
At least five Wall Street pros would go on to slash their price targets on Toast following the Tuesday-afternoon results. A sixth analyst -- Clarke Jeffries at Piper Sandler -- downgraded the stock, concerned about a slowdown in same-store transaction volume and uncertainty about consumer spending trends on dining in the coming year. Wood is bucking the trend, buying when others are tossing out the burnt Toast.
Ginkgo Bioworks
Another stock moving lower is Ginkgo Bioworks, even if its 3% dip on Wednesday is tame relative to the double-digit slides at the other two stocks highlighted here. It's taking a bigger hit on Thursday after the biosecurity and biofoundry specialist posted better-than-expected revenue of $55 million for the third quarter, but a deficit of $0.16 a share that was more red ink than the $0.09-a-share loss that Wall Street was modeling.
The report led to a downgrade by BTIG, from buy to neutral. A miss on its cell programs and challenging capital markets finds BTIG taking a more cautious stance on the stock. Wood has been building up her position in recent weeks. She was buying on Wednesday before Ginkgo Bioworks' update. It wouldn't be a surprise if she's a buyer on Thursday, too.
Robinhood Markets
This brings us to Robinhood Markets. The stock matched Toast's 14% plunge on Wednesday. The next-gen online trading platform also put up disappointing financial results. Revenue rose 29% to $467 million, but that was short of the 33% increase that investors were expecting. Its third-quarter loss also was slightly worse than projected.
The bad news is that its user base keeps shrinking. It now has 10.3 million monthly active users on its platform, a 16% decline over the past year. The good news is that a buoyant crypto market has boosted its assets under custody by 34% over the past year to $87 billion. Average revenue per user has risen 27%. Robinhood keeps rolling out new offerings, but until it starts growing its active users, it will be hard to get anyone besides Wood excited about the stock.
