Iconic growth investor Cathie Wood is hoping to bounce back this year. The largest of her funds at Ark Invest – where she is co-founder and CEO – is down 7% this year, a contrast to markets that are trading slightly higher in 2024. She is not standing still but continues to make opportunistic purchases and sells across her portfolios.
Wood bought shares of Palantir Technologies (NYSE:PLTR), Teladoc (NYSE:TDOC)And Year (NASDAQ:ROKU) on Tuesday and added some of their largest positions. Palantir has retreated somewhat since hitting a two-year high last month, but Teladoc and Roku are trading well below their previous highs. Let’s take a closer look at these three purchases.
1. Palantir
Palantir was one of the biggest market winners last year and hasn’t slowed down in early 2024. The software developer for the intelligence community saw its stock nearly quadruple in the 14 months to the end of February. Shares hit a new two-year high in early March, but Palantir is now trading lower for the second month in a row.
Palantir is making significant deals, but it’s no longer just a play on solutions for the military and other public sector entities. The same skills that made him popular as a government contractor are put to good use at private companies. U.S. commercial sales may have been just $131 million — or less than 22% of the $608 million the company generated last quarter — but that segment’s sales rose 70%.
A steady stream of press releases celebrating new contracts is helping Palantir gain attention. It has also become very popular in the last year and is changing as a nod to artificial intelligence (AI).
The upside has become a bit too much even for some of his former believers. Brian White of Monness, Crespi, Hardt & Co. downgraded Palantir to “sell” two weeks ago, concerned that the “AI hype cycle” had pushed the stock’s valuation to unsustainable levels. Of course Cathie Wood doesn’t see it that way. On Tuesday she increased her efforts.
2. Teladoc
One of the big market winners at the beginning of the pandemic crisis was Teladoc. The pioneer of telehealth services offered the right platform at the right time. Anyone could receive medical advice for a growing number of concerns without leaving home, provided they had an online connection and, ideally, a webcam.
Instead of catapulting telemedicine into the mainstream, people apparently had no problem taking the time to wait in the doctor’s and therapist’s office. Teladoc’s revenue has declined for 11 consecutive quarters, and that’s not even the platform’s biggest problem.
The number of visits assisted by the telehealth service fell 8% in the most recent quarter and fell 1% for all of 2023. The number of people with insurance plans that cover Teladoc visits continues to grow, but more and more of them are returning to in-office consultations.
The red numbers continue and analysts do not expect the losses to disappear until 2027 at the earliest. The CEO resigned last week, but it may take more than new leadership to get Teladoc back on track.
3rd year
Roku may have more than doubled last year, but the stock is still trading 87% below the all-time high it reached in the summer of 2021. The popular streaming video hub continues to grow its audience. Monetization and lack of profitability remain the biggest challenges.
Sales have returned to double-digit percentage growth in the last three quarters, but deficits remain. Like Teladoc, analysts don’t expect Roku to return to profitability until 2027. Another pressure point for investors is that average revenue per user saw a decline both sequentially and year-over-year.
As the competitive landscape becomes more intense, Roku’s cost prioritization initiatives cannot come at the expense of engagement. Roku will have a lot to prove when it reports its first-quarter results next month.
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Rick Munarriz holds positions at Roku. The Motley Fool has positions in and recommends Palantir Technologies, Roku, and Teladoc Health. The Motley Fool has a disclosure policy.
Cathie Wood Goes Bargain Hunting: 3 Stocks She Just Bought was originally published by The Motley Fool