Cathie Wood is on a roll. The co-founder, CEO, and chief investment officer of Ark Invest is at her best when growth stocks are rallying, and that's the case right now. Her largest exchange-traded fund (ETF) is up 42% over the past three months and a whopping 79% over the past year.
Ark bought shares of Advanced Micro Devices (AMD 5.57%), Toast (TOST -1.65%), and Ibotta (IBTA -7.66%) on Wednesday, expanding her existing stakes.
1. Advanced Micro Devices
When Ark was adding to its AMD position on Monday, it was easy to connect the dots. The maker of GPUs and microprocessors was reporting its second-quarter results on Tuesday afternoon. Wood was betting on a positive market reaction to the report, buying ahead for a little extra kick.
The financial update didn't play out that way. AMD stock took a 6% hit on Wednesday. Wood was wrong. She was early. Hoping to make the best of a bad situation, Ark was buying even more AMD shares at a lower price point during the midweek sell-off.
AMD's second quarter was mixed. Revenue rose 32% to a record $7.7 billion. It was the first quarter of decelerating top-line growth after four periods of acceleration, but it was well ahead of the 27% growth that Wall Street pros were modeling. It was a beat, but the victory lap didn't make it all the way down to the other end of the income statement.
Image source: Getty Images.
AMD's adjusted profit of $0.48 a share -- a 30% year-over-year decline -- was merely in line with analyst estimates. After a long run of quarterly beats, AMD proved mortal on the bottom line.
A leadership baton was handed over during the quarter. Over the past year, it's been AMD's data center segment that has been shouldering the burden of growth. This time the segment only rose 14% to $3.2 billion, sliding to account for less than 42% of the revenue mix. It was a 69% top-line jump for its client and gaming segment doing the heavy lifting this time.
Guidance calls for revenue to climb 28% for the current quarter, and that doesn't include the potential upside if trade restrictions with China ease so it can ship its Instinct MI308 GPUs. Analysts didn't seem to mind the sell-off. At least a dozen of them boosted their price targets following its quarterly results. They might just be catching up to the last few months of upticks, but it's a good thing to see on a day when the stock is going the other way.
2. Toast
Another stock that was eighty-sixed by the market on Wednesday despite a solid quarter was Toast. The growing provider of point-of-sale platforms for restaurant operators was initially trading as high as 7% after announcing its numbers after the market close on Tuesday. Toast would go on to lose 4% of its value by the end of trading on Wednesday, a cruel 11% reversal in the span of less than 24 hours.
Toast is still finding new eateries flocking to its sticky enterprise solution that does so much more than just cash customers out at the end of a meal with its portable devices. Toast closed out the quarter serving 148,000 locations, 24% more than it was assisting a year ago. Gross payment volume rose 23%, and that increase is slightly less than the restaurant count on its platform. This could be a minor pressure point for the industry if folks are spending less at restaurants. It could also be a sign that Toast is growing by reaching out to smaller eateries, but that's hard to believe with Toast starting to score deals with larger chains of high-volume concepts.
Revenue rose 25% -- and its annualized recurring run rate grew 31% -- but that's a testament to its ability to expand its business and improve its product beyond merely a payment platform. Its net income soared fivefold. Toast is doing just fine as a business. Even after Wednesday's hit, the shares are up 35% so far this year.
3. Ibotta
Ibotta was the only stock of the three to move higher on Wednesday, but it was also a case of Wood shopping for bargains. The company behind a digital marketing app that rewards users with cash-back rewards for making in-store or online purchases through ad-sponsored deals is down a blistering 44% this year.
It doesn't report until next week, and expectations are low compared to AMD and Toast. Ibotta was growing quickly at the time of its initial public offering (IPO) last year, having seen its top line shoot 52% higher for all of 2023. Revenue would go on to decelerate to 15% last year, and it continues to tap the brakes. Ibotta's guidance for when it reports second-quarter results next week calls for a 2% increase in revenue on a double-digit decline in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
Analysts see a return to double-digit revenue and earnings growth in the second half of this year and through 2026, so its guidance next week is crucial for paying off for Wood's purchase this week. Ibotta is transitioning from a direct-to-consumer model to a third-party approach. It's bringing more users to the platform, but they are less engaged than its original lucrative audience. Delivering on ambitious analyst expectations can get Ibotta's stock chart moving in the right direction.
