Cathie Wood has been surprisingly quiet on the trading front lately. The Ark Invest co-founder and CEO refrained from making any buys or sells for three consecutive trading days before finally making some moves on Tuesday. What did she do?
The aggressive growth investor only added to three existing positions. She bought shares in Zoom Video Communications (ZM 1.57%), Teladoc Health (TDOC -2.40%), and Recursion Pharmaceuticals (RXRX 3.57%) on Tuesday. Let's take a closer look at the stocks she is buying.
1. Zoom Video Communications
The sharp deceleration at Zoom Video over the years has to make shareholders feel like crash test dummies. This was a business that saw its revenue more than quadruple in the fiscal 2021 year that ended in January of that year, as its videoconferencing platform became the lifeline that businesses, classrooms, and families needed to stay connected in the wake of the COVID-19 crisis. The business has cooled down substantially since then.
Revenue would go on to climb a respectable 55% in fiscal 2022, plunging to a mere 7% last fiscal year. Zoom continues to slow to a 3% pace through the first three quarters of fiscal 2024. When it posted its fiscal third-quarter results this week it delivered 3.5% in top-line growth on a constant-currency basis, Zoom's sixth consecutive report with single-digit revenue growth.
Image source: Zoom Video Communications.
Things could be worse than modest growth, of course. Zoom continues grow its largest customers, as accounts generating at least $100,000 in trailing-12-month revenue have risen 14% over the past year. It now serves 219,700 enterprise customers, a 5% increase. Its 12-month net dollar expansion rate for those customers is just 105% -- translating into returning customers spending 5% more than the prior year -- but at least it is positive. Business has been more problematic for its online retail customers, but churn is starting to stabilize and actually improved slightly over the past year.
The news is better on the bottom line, as adjusted net income rose 21%. Analysts were bracing for a decline. Zoom also raised its guidance. Wood apparently liked this week's financial update. She added to her Zoom position, currently the sixth-largest holding across all of her portfolios.
2. Teladoc Health
Teladoc is following a slightly similar deceleration trajectory as Zoom Video, only it's been less extreme. The telehealth services provider saw its revenue nearly double in the first year of the pandemic, but it was padded substantially by a huge acquisition. Revenue growth has decelerated sharply for the last three years, but the 8% year-over-year top-line gain it posted last month was its first quarter with a single-digit increase.
Teladoc met or exceeded its earlier guidance, but its outlook for the current quarter fell short of analyst expectations. At least seven major analysts have lowered their price targets on the stock since its poorly received third-quarter report.
The merits of Teladoc as a platform are easy to understand. Patients save time and money with video sessions for many basic consultations. Insurers and employers also make out nicely, saving money and downtime. It's somewhat surprising that after the initial surge of traffic to Teladoc's platform, folks returned to archaic in-office visits when a videoconferencing consultation could do the trick.
3. Recursion Pharmaceuticals
Wood has been building up her position in Recursion Pharmaceuticals this month, and it was one of three stocks that she was buying on Tuesday after a few days of staying away from the trading floor. Recursion may sound like a run-of-the mill pharmaceuticals company, but in typical Wood fashion there's something different here.
Recursion uses a series of next-gen tech tools -- machine learning, artificial intelligence (AI), large language models, big data, and lab automation -- to help speed up the process for drug discovery and development. The proposition is working, judging by some recent collaborations between the biotech and some major partners. It did serve up financial results two weeks ago that fell short of expectations for both ends of the income statement, but it's obviously too soon to judge this early-stage potential disruptor on its quarterly numbers.
