Cathie Wood makes it easy to keep an eye on her aggressive growth habits. The co-founder, CEO and investment manager of the Ark Invest family of exchange-traded funds posts her trades at the end of each trading day. She became a widely followed player with monster returns in 2020. Last year, she followed consecutive years of disappointing returns with another market-boosting performance.
Things won’t go so well in 2024, but that won’t stop her from refining her collection of growth stocks day by day. Wood expanded her existing positions in Shopify (NYSE: STORE), Intellia Therapeutica (NASDAQ: NTLA)And Adaptive biotechnologies (NASDAQ: ADPT) on Tuesday. Let’s take a closer look at the stocks trading 16% to 29% lower in 2024.
1. Shopify
The online retail giant is one of Wood’s top 10 holdings in her combined portfolios and plays a small role in her market-busting performance last year and this year’s decline. Shares of the e-commerce platform that gives merchants of all sizes a way to showcase their digital storefronts more than doubled last year. The stock is down 27% in 2024, and a poorly received financial update earlier this month didn’t help.
Sales rose 23% in the first quarter, or an even heartier increase of 29% if you roll back the logistics activities that were offloaded over the past year. This isn’t why the stock plummeted 19% on the day it announced results. The top results exceeded market expectations. It was also a hit on the bottom line. The problem was in the guidance. Shopify warned that growth for the current quarter will slow to the high teens, or low to mid 20s, when adjusted for the lack of logistics activity. Wall Street expected more. At least fourteen analysts are expected to lower their price targets for the stock after the May 8 report.
Shopify has been a rock star for investors, posting 47% or better revenue growth for nearly a decade through the end of 2021. This will be the third consecutive year of sub-30% earnings growth on the top line.
If you dig deeper, there is still a strong business here. It has delivered double-digit free cash flow margins for three quarters in a row, and that streak is expected to reach four in the current quarter. Revenue growth may be slowing, but Shopify continues to gain market share. Analysts see sales increasing by 21% this year and another 20% in 2025. It may translate into four years of failing to exceed 30% growth, but an optimist would see it as four years of us being able to achieve 20% growth. Earnings gains should be even stronger.
Wood sees an opportunity in the post-earnings sell-off, which has continued to eat away at shares over the past two weeks. She may not be alone. Goldman Sachs upgraded the stock on Wednesday, saying the downticks were overdone.
2. Intellia Therapies
Intellia is another important holding within the Ark portfolios. There are only a dozen stocks with a larger weighting. Wood has stakes in a number of gene-editing stocks, figuring that owning a basket of the most promising players will be worth it even if only one of them makes a big break.
Like Shopify, Intellia didn’t soar after beating expectations on both sides of the income statement two weeks ago. The good news is that the stock hasn’t fallen lower following the news, even though shares are still down 16% so far this year.
This is not a stock that is judged by its quarterly results. The real story here concerns some potentially promising CRISPR-based therapies. Intellia has one treatment entering the crucial third phase of clinical trials and a second soon. Since the balance sheet is rich in cash, time is on its side. Wood’s Ark owns a whopping 10.6% of Intellia’s total shares.
3. Adaptive biotechnologies
Wood added to just four of her existing positions on Tuesday, and three of those were gene-editing stocks. Adaptive biotechnology was one of them. She has a smaller position in the genetic sequencing technology specialist than the other additions, but she still owns more than 7% of Adaptive’s outstanding shares.
The stock is trading 29% lower in 2024, but this stock moved higher after the company posted financial results two weeks ago. It raised the midpoint of its full-year revenue guidance for its Minimal Resid Disease (MRD) business, its largest segment. Losses also continue to decline, but investors are still unimpressed. The CFO leaving the company to pursue a new opportunity is not a good idea, but Wood still believes in it.
Should You Invest $1,000 in Shopify Now?
Before you buy shares in Shopify, consider the following:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Shopify wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $584,435!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns May 13, 2024
Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Goldman Sachs Group, Intellia Therapeutics, and Shopify. The Motley Fool has a disclosure policy.
Cathie Wood Goes Bargain Hunting: 3 Stocks She Just Bought was originally published by The Motley Fool
