Cathie Wood: Innovation stocks are in ‘low price’ territory

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Here are three contrarian tech stocks to consider during uncertain times

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Market appetite for growth stocks has changed.

Ark Innovation ETF (ARKK), which focuses on disruptive innovation, had a whopping 152.8% return in 2020 but fell 23.4% in 2021. Year-to-date, it fell another 35%.

But Ark Invest’s Cathie Wood is sticking to her guns.

In fact, she recently told CNBC that we have “one of the biggest capital misallocations in human history.”

“You have investors investing in the past. Benchmarks are where they are, and especially the biggest companies and stocks in benchmarks are where they are because of past successes,” Wood said. “If we’re right, it’s the businesses that are going to be disrupted.”

Wood also thinks the current risk aversion has driven innovation stocks into “bargain prices.”

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Against that backdrop, here’s a look at three compelling names in ARKK’s portfolio that could make a comeback. You can recover some of them by using a new trading platform that allows you automatically invest your spare change.

Teladoc Health (TDOC)

Teladoc Health is one of the leading telemedicine companies in the United States. It has a consistent track record of growing revenue and improving margins.

Unsurprisingly, the company benefited from the extraordinary environment created by COVID-19.

When non-life-threatening in-office medical care was suspended at the height of the pandemic, telehealth adoption exploded.

Teladoc revenue grew 98% in 2020 to US$1.09 billion, with total visits jumping 156%.

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The momentum continued in 2021, with the company seeing revenue growth of 86% and an increase in total visits of 38%. It also generated $194 million in operating cash flow for the year – a significant jump from a loss of $54 million in 2020.

Teladoc shares are down more than 32% since the start of the year, but remain ARKK’s second largest holding, accounting for 6.5% of the fund’s weight.

Wood isn’t the only one who sees potential in the telemedicine business. On Feb. 11, Goldman Sachs analyst Cindy Motz hedged Teladoc with a buy rating and price target of US$121, noting that the company is “setting the stage for greater market disruption.” health technology sector”.

Motz’s price target implies around 100% upside potential.

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Unity Software (U)

Often presented as a high level metaverse gamevideo game software development company Unity caught the attention of investors last year.

In November, the company acquired the visual effects studio behind “Avatar” and “The Lord of the Rings.” The stock soared to over US$200 per share on November 18, but quickly gave up gains.

Today, Unity is trading at around US$97 apiece, down more than 50% from those 52-week highs.

Business, however, continued to grow rapidly.

In the fourth quarter of 2021, revenue increased 43% year over year to US$315.9 million. The adjusted net loss was 5 cents per share, compared to an adjusted net loss of $0.10 per share incurred a year ago. The numbers also beat Wall Street expectations, as analysts had forecast a loss of 7 cents a share on $295.5 million in revenue.

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As stocks continue to trade at battered levels, Unity remains a top 10 holding in Wood’s flagship fund, with a weighting of 4.9%.

On Feb. 4, Credit Suisse reiterated an outperform rating for Unity and set a price target of US$180, around 86% above current levels.

Block (SQ)

Investors looking for contrarian ideas should check out Block, the digital payments technologist formerly known as Square.

Management changed the name in December as “Square” had become synonymous with the company’s vendor business. But this decision did little to reassure investors. Since the start of the year, shares in the bloc have fallen more than 40%.

Although the company is far from a market favorite at the moment, it continues to show very impressive growth numbers.

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In the third quarter of 2021, revenue increased 27% year over year, while gross profit increased 43%.

The improvement was generalized. For the quarter, transaction-based revenue jumped 40% year-over-year, driven by a 43% increase in gross payment volume. Revenue from subscriptions and services, meanwhile, jumped 55% from a year ago.

Block is also a game on cryptocurrency. In the third quarter, the company’s Cash app generated $1.82 billion in bitcoin revenue and $42 million in gross bitcoin profit.

Ark Invest holds just under 4.8 million shares of Block, making it the 10th largest holding in the portfolio with a weighting of 4.2%.

On Feb. 11, Bank of America analyst Jason Kupferberg moved Block from neutral to long with a price target of US$185, noting that the company is now “pretty undervalued.”

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Kupferberg’s price target implies a potential upside of around 95% from where the stock currently stands.

If some of these negative stock price numbers make you think you should diversify your portfolio, consider fine arts, which is known to have almost no correlation with stock markets. Thanks to a new split trading platformtop-notch art is now accessible to everyday investors.

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