Another Monday market sell-off gave ARK Invest CEO, Chief Investment Officer, and founder Cathie Wood a way to add to some of her favorite stocks at a relative discount. Some of the stocks that made Wood a household name with triple-digit percentage gains across most of her exchange-traded funds in 2020 are on sale now, and she's buying.
Zoom Video Communications (NASDAQ:ZM), Roku (NASDAQ:ROKU), and Teladoc (NYSE:TDOC) have fallen between 40% and 60% from their all-time highs. Let's see why Wood added to all three positions for her ETFs on Monday.
Image source: Getty Images.
Zoom Video Communications
Shares of Zoom hit a new 52-week low on Monday. It's hard to fathom a company that skyrocketed to fame during last year's COVID-19 crisis shedding more than half of its value over the past year, but here we are. And so is Wood with open buy orders. ARK Invest has been buying all the way down, including on Monday with purchases for a pair of Wood's ETFs.
The silver lining here is that Zoom is still growing. You may be on the videoconferencing platform less these days, but companies and individuals are still paying for premium accounts to make sure that Zoom is ready for them as needed. Revenue rose 54% in its latest quarter, decelerating from heady triple-digit gains over the five previous reports, but still clearly a growth stock.
Zoom is making inroads into related categories beyond its flagship videoconferencing platform. A deal to acquire a company that would've made it a major player in the contact center market fell apart last week, but that won't stop Zoom from forging ahead with its homegrown solution. Remember that triple-digit price-to-revenue multiple that used to stump Zoom bears? The cascading stock and soaring top line over the past year finds Zoom now trading at a revenue multiple in the high teens.
Roku
Trading just 40% off its high, Roku is the tamest of Mr. Market markdowns on this shopping list. Roku is the pioneer in streaming video gadgetry, and it continues to be a niche leader with 55.1 million active accounts through the end of June.
Roku powers streaming experiences through a series of affordable dongles that plug into TVs. It's also the default operating system in 38% of the smart TVs shipping in this country.
Business is booming. Revenue soared 81% in its latest quarter as user growth (up 28%) is getting a boost from an even bigger increase in ad revenue per user. Wood did unload some of her Roku shares earlier in the summer, but she's been building her position back up aggressively since early August. Roku's founder CEO is Anthony Wood, but he is not related to Cathie Wood.
Teladoc
Teladoc paid $18.5 billion in stock last year to acquire the smaller Livongo Health. Now you can buy the combined company for less than $20 billion. Teladoc's 60% haircut from its February highs is brutal, and tied largely to the rollout of viable COVID-19 vaccines that make its telehealth platform less necessary.
However, Teladoc doctors, therapists, specialists, and dietitians are available for virtual healthcare sessions for non-emergency issues and folks that got a taste of telehealth seem to like it. Teladoc's platform offers convenience.
It's not just COVID-19 vaccines weighing on Teladoc. Competition is heating up, and profitability is a problem. Teladoc has posted a larger-than-expected loss in each of the past four quarters. Investors should know that this isn't a bottom-line growth story at this point in its disruptive life cycle. A markdown may have been warranted, but a stock that may have been overbought in February seem considerably oversold here.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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October 05, 2021 at 10:25PM
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