This hasn't been a good year so far for Cathie Wood. The Ark Invest co-founder and CEO has seen many of her favorite stocks slide in an otherwise ascending market. Though 2024 has gotten off to a strong start for most growth investors, Ark Invest's largest exchange-traded fund (ETF) is trading 4% lower year to date. Some of her top holdings are faring even worse.
Shares of Tesla (TSLA +0.97%), Roku (ROKU +0.83%), and Roblox (RBLX +3.62%) are down by between 20% to 31% so far in this young year, but Wood added to all three positions on Monday. Let's look at a closer look at the currently out-of-favor stocks she is buying.
NASDAQ: TSLA
Key Data Points
1. Tesla: Down 31%
Tesla's stock price more than doubled in 2023. This year, it has been a different story. The leading maker of electric vehicles (EVs) moved lower in January after it announced poorly received financial results for the fourth quarter. Revenue rose just 3% to $25.2 billion while adjusted earnings plummeted 40% to $0.71 a share. Analysts had been expecting more on both fronts.
It should not be a surprise to see the company's sales growth slowing and margins getting crushed. Tesla spent most of last year slashing EV prices in an effort to drum up enough demand to match its stepped-up EV production. Cutting its sticker prices to where even the base Model X now qualifies for the $7,500 federal tax credit has helped move cars.
Indeed, Tesla had no problem selling cars: New unit deliveries soared 20% in the fourth quarter. It was the sharp year-over-year decline in average selling prices -- along with the continuing shift among buyers to the lower-priced Model 3s and Model Ys -- that resulted in the disappointing 3% increase on the top line. The bottom line was naturally going to suffer as the company's price cuts have been outpacing its potential cost savings.
Image source: Getty Images.
The stock started to bounce back in February with the broader market, but it has slumped again this month on concerns that the current quarter will be another dud. With Tesla offering aggressive promotions to buyers of its existing inventory as long as they take possession of their new EVs by the end of March, there's growing sentiment among observers that its first-quarter numbers will be soft. Bernstein analyst Toni Sacconaghi slashed his price target on Tesla from $150 to $120 on Tuesday, sharply lowering his estimates on production for the current quarter and all of 2024. He also initiated an earnings forecast of $2.22 a share for 2025, well below the analysts' consensus of $3.67 a share and considerably less than what Tesla earned in 2022 and 2023.
Wood doesn't mind buying into a stock that is down by nearly a third this year. Tesla has bounced back from sharp sell-offs before. Tesla remains the second-largest holding across all of Ark Invest's portfolios.
NASDAQ: ROKU
Key Data Points
2. Roku: Down 29%
Roku, another top Ark Invest holding, also more than doubled last year. Currently, it's the fund manager's fourth-largest position. The streaming platform powerhouse is growing its engagement and widening its audience, but the concern now is that its competitors are getting hungry and that Roku's return to profitability may not happen soon.
There are now 80 million active accounts on Roku's operating system, a 14% increase over the past year. However, it continues to lose money, and average revenue per user clocked in with a surprising sequential dip in its disappointing fourth quarter. Analysts don't foresee a return to profitability until 2027, but Roku has rolled out initiatives that prioritize a return to positive bottom-line results.
Wood is patient. She's watching, cradling the remote as she buys more of the volatile streaming services stock.
NYSE: RBLX
Key Data Points
3. Roblox: Down 20%
Roblox is Ark's tenth-largest position. The online gaming platform developer didn't double in value like Tesla and Roku last year, but its 61% gain in 2023 trounced the broad market averages. It has, however, retreated in 2024.
Unlike Tesla and Roku, Roblox shares moved higher after the company posted better-than-expected fourth-quarter results. Revenue and bookings rose by 30% and 25%, respectively, in the quarter, accelerating from where it was in the first half of the year. Its top-line guidance for 2024 was also encouraging. However, its loss forecasts have been widening.
Its number of daily active users has recovered since a sequential dip in the second quarter of last year. If the game platform's popularity continues to grow, one can expect that the upticks will follow. Wood seems to think so, judging by her decision to add to her stake in the company on Monday.
