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It’s safe to say that Cathie Wood doesn’t care if it rains. The co-founder, CEO, and investor at Ark Invest isn’t afraid to increase her positions when they’re down, and she did a little bit of that on Friday. did.
Mr. Wood spent the last trading day of last week aggressively buying stocks that were down as the broader market fell.she upped her stakes even more Roku (NASDAQ:ROKU), unity software (NYSE:U)and SoFi technology (NASDAQ:SOFI), all three stocks fell more than the market. Let’s take a closer look at the three purchases.
1. Roku
One of Wall Street’s biggest sinkers on Friday was Roku. Shares of the company, which developed the original smart TV operating system, plunged 24% after consecutive declines in average revenue per user. Wood had been actively buying up her Roku stock in three of her funds.
Roku’s report was solid on the surface. Revenue growth of 14% exceeded analyst targets and proprietary guidance. The company’s sales outlook for the current quarter also looks good compared to Wall Street expectations. But Roque put a damper on any potential bullish parade by clouding uneven ad returns. This is problematic for a business model that relies almost entirely on the connected TV ad market to generate revenue.
But there’s no question about Roku’s popularity. It remains the primary operating system for smart TV connectivity across North America. Over the past year, we’ve seen double-digit growth in account numbers and even stronger engagement. The average account holder currently spends over 4 hours per day streaming on the platform. Considering all this, you might think that the average revenue per user should go up, but that’s not the case.
Roque notes that media and entertainment promotional spending activity is on the decline. Roku has thousands of apps, and their spending activity is a significant part of driving their average revenue per user. The streaming service’s stock price has more than doubled in the last year, but it’s now down more than a third since hitting a 52-week high in December. Still, Roku remains his fourth-largest holding in Ark Invest’s entire portfolio.
2. Unity Software
Unity has again failed to connect with investors this year. The game engine developer’s stock has fallen 17% since the beginning of the year. The company is undergoing some downsizing, announcing last month that it would lay off about 25% of its workforce.
Unity has posted higher-than-expected quarterly losses over the past year, and could see more similar losses when it reports again next week. Wall Street pros see the company’s losses widening even as sales rose 25% from a year ago. Profitability challenges have depressed the stock price, and Unity’s CEO resigned four months ago.
Platforms facing problematic losses often raise fees to improve margins, but that didn’t work out so well for Unity last year. The company introduced new fees for developers last summer, but was forced to reverse the policy after facing customer outcry. A new CEO might not be such a bad idea.
3. SoFi technology
SoFi stock has fallen 16% since the beginning of the year, which is comparable to a 20% jump three weeks ago on the day the company announced its stunning earnings results. The fintech provider finally announced its first-year net profit last month, after 11 consecutive quarters of positive adjusted earnings.
We currently have 7.5 million accounts, an increase of 44% over the past year. SoFi aims to increase annual compounded returns by 20% to 25% over the next three years. Earnings should slow this year, but a new profitable trajectory could attract even more investor attention.
Should you invest $1,000 in Roku right now?
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Rick Munarriz has a position at Roku. The Motley Fool owns and recommends Roku and Unity Software. The Motley Fool has a disclosure policy.
The first edition of Cathie Wood Goes Bargain Hunting: 3 Stocks She Just Bought was published by The Motley Fool
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