These are challenging times for Cathie Wood’s investing style. The co-founder, CEO and investor of Ark Invest sees her family of exchange-traded funds with aggressive growth losing on the market for the third time in four years in 2024. Can she get back on track? She certainly doesn’t stand still.
Ark Invest took many steps on Tuesday and expanded nine of its existing positions. Roku (NASDAQ: ROKU), Air mobility of the leaf (NASDAQ:BLDE)And PagerDuty (NYSE: PD) are some of the names on that shopping list. Let’s take a closer look at that.
1. Roku
It’s not just Roku’s 81.6 million households that watch a lot of Roku. Wood has increased her position for four consecutive trading days. Does ‘binge investing’ exist? Ark Invest now owns more than 9% of Roku’s total outstanding shares.
Like many of the stocks that propelled Wood’s funds to market-high returns in 2000 and then into 2023, Roku was a rock star last year. The streaming video platform’s shares have more than doubled. This year was anything but a welcome recurrence. Roku is down 40% in 2024, a laggard that buffers in an otherwise booming market.
Roku is still growing. The number of households relying on Roku’s operating system to power their TV streaming has increased 14% in the past year. Engagement is even better, as hours streamed increased 23% in the last quarter.
There are a few things holding Roku back. After a brief profitable run, Roku has now racked up nine consecutive quarterly deficits. It’s delivered positive free cash flow for three quarters in a row — and nine-figure free cash flow at that — but investors will applaud once Roku returns to true profitability.
Another thing holding Roku back is the fear of it Walmart entering this space after announcing plans to acquire a small Roku rival could prove disruptive. This isn’t ideal, but it doesn’t seem like a game changer. Regulators still need to approve the deal, and even if the antitrust hurdles are cleared, it’s not as if Roku isn’t ready. The country has been battling some of the nation’s most valuable consumer and consumer technology companies for years. It’s more than just keeping oneself afloat.
Average revenue per user has also been sluggish, but Roku could be turning that corner. On that front, the economy has seen only one straight decline in the past four quarters. With streaming hours now outpacing active user growth, it’s only a matter of time before advertisers start spending more of their money where viewers are spending more time.
2. Air mobility of the blade
Compared to Roku’s 40% decline so far this year, Blade Air Mobility’s 9% decline in 2024 is a small pocket of turbulence. Blade Air provides on-demand helicopter transportation services, primarily to transport affluent passengers from airports to city centers in densely populated markets. Getting from JFK to the heart of Manhattan in just five minutes obviously has its appeal if you can afford the convenience. Blade also works with hospitals and other medical partners to transport organs in a timely manner.
Revenue rose 14% to $51.5 million in the latest quarter, and the top-line jump would have been 22% if you exclude BladeOne’s scheduled jet service between New York and South Florida, which was discontinued last year. Margins are improving, but profitability is still a few years away.
Growth has slowed from the high pace in 2021 and 2022, when sales more than doubled in consecutive years. There are a few publicly traded players in this high-end, short-flight aviation niche, but Blade stands out as an early mover. It is investing in high-tech and carbon-neutral electric vertical aircraft to keep pace with some of the younger players, but the short-haul market will be a long battle.
3. PagerDuty
PagerDuty is down just 5% this year, but it’s been a frequent buy for Ark Invest lately. Wood added shares of the cloud-based business analytics and uptime monitoring provider every trading day in June.
PagerDuty’s slowing growth is a concern. The company has been decelerating consistently for nearly two years, dropping from 34% top-line growth to just 8% in its latest financial update.
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Q2 2023: 34%
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Q3 2023: 31%
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Q4 2023: 29%
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Q1 2024: 21%
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Q2 2024: 19%
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Q3 2024: 15%
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Q4 2024: 10%
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Q1 2025: 8%
It’s not just Wood who’s paying attention to PagerDuty this month. Craig-Hallum analyst Chad Bennett went into coverage on the stock two weeks ago, raising the company’s rating from hold to buy. He also raised the stock’s price target from $21 to $30, which translated into 37% of potential upside from where it stands today. With revenue growth expected to accelerate later this year and PagerDuty posting double-digit earnings growth last year, this could be the right choice.
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Rick Munarriz has positions in Roku. The Motley Fool holds and recommends positions in PagerDuty, Roku, and Walmart. The Motley Fool has a disclosure policy.
Cathie Wood Goes Bargain Hunting: 3 Stocks She Just Bought was originally published by The Motley Fool
