Thursday, 4 January 2024
by Earn Media
Cathie Wood kicked off the new trading year with three fresh purchases for her Ark Invest family of exchange-traded funds. All three stocks coincidentally begin with the letter “R” — even though it wasn’t a pirate-themed shopping spree.
Wood added to existing positions in Roku (NASDAQ: ROKU), Recursion Pharmaceuticals (NASDAQ: RXRX), and Rocket Lab USA (NASDAQ: RKLB) on Tuesday. Let’s take a closer look.
Shares of Roku more than doubled in 2023. Wood often finds herself adding to her out-of-favor positions, but that didn’t stop an ascending Roku from being one of her first three buys of 2024.
The streaming service stock bounced back from the dead last year. Mounting losses and slowing revenue growth in light of a weak connected TV advertising market pummeled the shares from their peak in the summer of 2021 through early 2023. The platform’s growing popularity and a top-line turnaround got Roku back on growth investors’ radar.
Roku has rattled off three quarters of accelerating revenue growth, starting with flat year-over-year results a year ago to a 20% increase in its latest report. Roku was able to expand its audience even as the stock languished. There are now 75.8 million active accounts on the streaming platform, a 16% jump over the past year and a 34% surge from where it was two years ago. Engagement has always been strong, but a macro hit to the advertising market slammed the brakes on its growth. The tide is finally starting to turn, with average revenue per user returning to sequential growth in its latest quarter.
The losses continue to be a problem. Roku is making big bets on content and expanding its product offerings, two things that don’t come cheap. The company is finally ready to tackle its bottom-line deficiencies, and analysts see the red ink being cut by more than half in 2024. If Roku can get back to widening its margin without losing momentum on user growth or the ad market recovery, it should be able to pad its gains in the year ahead.
If you’re a fan of traditional valuation tools, Recursion Pharmaceuticals isn’t cheap. It’s packing a market cap of $2.1 billion with trailing revenue just below $50 million. The appeal of Recursion to Wood and other investors in early-stage biotechs is its long-term potential.
Recursion isn’t your garden-variety biotechnology upstart. It’s a clinical stage techbio company. Its Recursion OS platform is an operating system that leverages machine-learning algorithms and trillions of searchable relationships across biology and chemistry to help speed up the the advancement of future treatments.
Recursion is years away from profitability and generating meaningful revenue. It doesn’t mean that the stock can’t keep moving higher. Time is on its side, given its cash-rich balance sheet that pushes its enterprise value down to $1.8 billion. Recursion also keeps striking deals to expand its platform’s reach, as well as improve its artificial intelligence aspirations.
Launching rockets into the sky has its ups and downs. Rocket Lab USA stock took a double-digit-percentage hit the day after one of its uncrewed rockets exploded last September. Rocket Lab shares took off two weeks ago after landing a $515 million contract with an unnamed U.S. government customer to build and operate 18 satellites.
It’s been a round trip to nowhere for the seasoned space services provider. Rocket Lab closed at $5.30 the day after its rocket blew up shortly after liftoff in September. The shares were at $5.31 at the end of trading on Tuesday. It still managed to launch 10 of its Electron rockets in 2023, a new record for the company, with 42 successful launches in its lifetime. With Rocket Lab’s largely successful history of deploying satellites, Wood adding to her stake suggests she thinks the next successful takeoff will be the stock itself.
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