If Wall Street is having a back-to-school sale, Cathie Wood is shopping. The widely followed growth investor who leads Ark Invest did a fair amount of buying on Tuesday. She publishes her daily transactions hours after the market close, giving investors a glimpse into what stakes she’s adding to and which ones she’s retreating from.
What’s she snapping up these days? Wood added to her existing positions in Zoom Video Communications (NASDAQ: ZM), Intellia Therapeutics (NASDAQ: NTLA), and Adaptive Biotechnologies (NASDAQ: ADPT) on Tuesday. Let’s take a closer look at the stocks she is buying.
Sometimes a “beat-and-raise” performance isn’t enough. Zoom posted stronger results than investors were expecting this week for the second quarter of fiscal year 2024, ended July 31. Revenue rose 4% — or 5% on a currency-adjusted basis — as a 10% jump in its enterprise segment was held back by a 4% slide in online revenue.
The story gets even better on the other end of the income statement. Reported earnings nearly quadrupled, with adjusted net income climbing 27% for the fiscal second quarter. Analysts were modeling just a 2% increase on the top line with flat growth in adjusted earnings. Zoom would also go on to raise its full-year revenue and net income outlooks, checking off the two boxes that typically deliver a post-earnings pop. It didn’t go that way for Zoom.
The stock may have initially moved higher in after-hours trading on Monday night, but the shares went the other way when the actual trading day resumed on Tuesday. Zoom closed 2% lower on Tuesday. In a strong year for equities, Zoom stock is now trading slightly lower in 2023. The shares are down a blistering 89% since peaking in late 2020 when Zoom was one of the biggest winners early in the pandemic era.
The numbers are improving. Businesses continue to lean on Zoom. There are now 218,100 enterprise customers on the platform, a 7% increase over the last year. Big spenders — those spending at least $100,000 over the past 12 months — have risen a hearty 18%. Its largely consumer-facing online business is understandably going the other way, but the churn rate is lower than it was a year ago.
At least four analysts would go on to lower their price targets on Zoom. One outlier who bumped his price goal higher was Tyler Radke at Citi, but he has a bearish rating on the stock. His new $66 price target is essentially where the shares are now. He feels the beat was a one-time event that will lead to softer billings in the current quarter. Wood likely doesn’t see it that way. She added to her position, which is currently the fifth-largest holding across all of her portfolios.
Wood’s interests stretch well beyond the Zoom Room. She’s a staunch believer when it comes to investing in gene-editing stocks, and Intellia Therapeutics is one of her favorites. Ark Invest now owns nearly 10% of Intellia’s total shares outstanding. There are only a dozen stocks with a larger combined weighting across all of Wood’s portfolios.
Intellia is still in the early clinical-phase trials for a pair of promising gene-editing therapies. Clearing the hurdles of the regulatory approval process is always challenging, but the payday could be substantial if one or ideally both treatments pan out.
There was a financial update earlier this month. Intellia posted a larger-than-expected loss on marginal revenue. The quarterly reports shouldn’t matter much for a company that has years to prove itself worthy, but at least two analysts were concerned. Wall Street pros at Citi and Canaccord Genuity would go on to slash their price targets on the stock after the report.
Another stock that saw a Wall Street firm lower its price target after offering up an earnings report this month is Adaptive Biotechnologies. The immune-system genetic sequencing technology specialist actually beat market estimates on both ends of its income statement. David Westenberg at Piper Sandler still went on to drop its price target from $15 to $14 in response.
After five consecutive years of delivering revenue growth of at least 15%, Adaptive’s top line is up just 5% through the first six months of 2023. Despite generating meaningful revenue it’s still several years away from being profitable. The good news is that its balance sheet has a strong net-cash position. Time is on its side, and even Westenberg’s new price target isn’t as bad as it seems. The stock would have to more than double to reach $14 at this point.
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