ARK Invest exchange-traded funds launched by Cathie Wood, CEO and chief investment officer of ARK Investment Management, made the headlines in 2020 due to their stellar performance that year. These funds typically focus on disruptive technologies or themes that are likely to become part of high-growth stories over the next decade. And as a part of the success of these funds, so-called “Cathie Wood stocks” came to fruition.
However, ARK Invest ETFs were hit hard in the past year. Investor rotation from growth into value stocks crushed the overstretched valuations of many of these holdings. Now, Wall Street debates whether these Cathie Wood stocks offer buy-and-hold investors attractive entry points. Given the significant declines, they could potentially offer significant upside.
For instance, Cathie Wood’s flagship fund, the ARK Innovation ETF (NYSEARCA:ARKK), significantly underperformed the Nasdaq 100 in 2021. It ended the year down more than 23%; whereas, the Nasdaq gained 26%. In addition, ARKK is down almost 40% year-to-date (YTD) compared to Nasdaq’s 20% decline over the same period.
Against this backdrop, here are seven Cathie Wood stocks worth buying in March:
- Mercadolibre (NASDAQ:MELI)
- Roku (NASDAQ:ROKU)
- Spotify Technology (NYSE:SPOT)
- Teladoc Health (NYSE:TDOC)
- UiPath (NYSE:PATH)
- Unity Software (NYSE:U)
- Vertex Pharmaceuticals (NASDAQ:VRTX)
Cathie Wood Stocks: Mercadolibre (MELI)
Our first stock is Mercadolibre, held in the ARK Next Generation Internet ETF (NYSEARCA:ARKW). Argentina-based Mercadolibre is an e-commerce giant with a network of roughly 132 million active buyers and 1 million sellers in Latin America. The region is widely regarded as the fastest-growing e-commerce region worldwide, with an e-commerce penetration level of only 10% expected by 2025.
Mercadolibre issued Q4 2021 results on Feb. 22. Revenues surged 74% year-over-year (YOY) on a currency-neutral basis to $2.1 billion. Yet, due to higher operating expenses and foreign currency losses, its net loss came in at $46.1 million, or a loss of 92 cents per diluted share. In the previous-year quarter, the net loss was $50.6 million. Cash and equivalents ended the period at $2.5 billion.
Unique active users across the e-commerce platform jumped from 78.7 million to 82.2 million during the quarter. As a result, fintech revenue saw a YOY increase of 70%, accounting for 37% of total revenue. In addition, Total Payment Volume (TPV) on its Mercado Pago payment platform increased to $24 billion, meaning YOY growth of 73%.
MELI stock hovers around $900, down 32% YTD. Shares are trading at a steep discount at 6.75 times trailing sales, the lowest since 2016. According to CNN Business, the 12-month median price forecast for MELI stock stands at $1,600.
Roku (ROKU)
Our next stock is Roku, held in the ARKK fund. San Jose, California-based Roku offers an operating platform serving as a hub for thousands of streaming services. The company generates revenue from advertising, hardware sales, subscription sales, distribution fees and operating system (OS) licensing.
Management announced Q4 2021 results on Feb. 17. Revenues grew 33% YOY to $865 million. Yet, net income declined to $23.7 million, or 17 cents per diluted share. In the previous-year quarter, net income was $67.3 million. Cash and equivalents ended the period at $2.1 billion.
Roku gained 8.9 million active accounts in 2021 to reach 60.1 million. Roku’s total number of active accounts stateside has recently exceeded total subscribers to all U.S. cable companies combined. The average revenue per user came in at $41.03, up 43% YOY.
Businesses are increasingly using Roku’s digital platform to reach a wider audience. Management anticipates a revenue increase of roughly 25% for the current quarter.
ROKU stock is around $110, down 52% YTD. Shares are currently trading at 5.8 times trailing sales. Meanwhile, the 12-month median price forecast for Roku stock is at $180.
Cathie Wood Stocks: Spotify Technology (SPOT)
Next up is Spotify, also held in the ARKK fund. The Sweden-based Spotify is the leading audio streaming service and media services provider. Its platform serves 406 million monthly active users and 180 million premium subscribers. The streaming company generates revenue from its premium ad-free service and ad-supported access to music and podcasts.
Spotify released Q4 2021 results on Feb. 2. Revenue grew 24% YOY to 2.69 billion euros. Net loss narrowed to 39 million euros, or 21 euro cents per diluted share, down from 125 million euros in the prior-year quarter. Cash and equivalents ended the period at 3.6 billion euros.
The advertising business, which now accounts for 15% of its total revenue, grew 40% YOY in Q4. The rapid growth was primarily due to the recent launch of the Spotify Audience Network (SPAN), a dynamic advertising marketplace for both music and podcasts. The growing popularity of podcasts could provide significant upside potential to Spotify’s non-music advertising business.
SPOT stock hit a 52-week low of $125.84 on Mar. 8, but managed to bounce off that low to close at $131.68. Nevertheless, it is still down 45% YTD.
Considering the shares are trading at a cheap 2.4 times trailing sales, this recent selloff offers an attractive buying opportunity for long-term investors. The 12-month median price forecast for Spotify stands at $247.84.
Teladoc Health (TDOC)
Continuing with our list is Teladoc Health, held in the ARK Genomic Revolution ETF (BATS:ARKG). The telehealth platform allows its clients to receive 24-hour, on-demand virtual medical care.
Last month, the company announced a new partnership with Amazon (NASDAQ:AMZN) to launch Teladoc on Alexa, Amazon’s digital assistant. The collaboration makes Teladoc’s services more accessible on supported Echo devices.
Teladoc announced Q4 2021 results on Feb. 22. Revenue grew 45% YOY to $554 million, which helped its net loss to shrink to $11 million, or 7 cents per share. In the prior-year quarter, the net loss was $394 million. Cash and equivalents ended the period with $894 million.
The total number of visits soared 38% YOY in 2021, reaching 15.3 million at the end of the year. Moreover, the average revenue per paid subscriber grew 52% YOY to $2.49. Management expects to grow its revenue at a compound annual rate of 25% through 2024.
TDOC stock is at $60 territory, down 67% over the past year and 35% YTD. Shares are trading at 4.9 times trailing sales. The 12-month median price forecast for Teladoc is at $100.
Cathie Wood Stocks: UiPath (PATH)
Moving on, the next Cathie Wood stock to consider is UiPath, which is held in the ARK Fintech Innovation ETF (NYSEARCA:ARKF). It provides robotic process automation (RPA) solutions. Gartner and IDC both named UiPath a market leader in using artificial intelligence (AI) to automate enterprise workflows.
The company develops UiPath Studio, a platform designed for RPA developers looking to build complex process automations with built-in governance capabilities.
Uipath released Q3 FY22 results on Dec. 8. Revenue increased 50% YOY to $221 million. However, the company reported a net loss of $122.8 million, or 23 cents per diluted share, up from a loss of $70.8 million a year ago. Cash and equivalents ended the period at $1.8 billion.
Investors were pleased that the company delivered 58% annualized renewal run-rate growth in Q4. Existing clients spent 42% more on UiPath’s services than they did in the prior-year period as well.
PATH stock hit a 52-week low of $26.96 on Mar. 7. It’s down 36% YTD. Shares are trading at 17.6 times trailing sales, compared to 60 times last year. The 12-month median price forecast for Uipath stands at $57.50.
Cathie Wood Stocks: Unity Software (U)
Our penultimate stock is Unity Software, held in the ARKK fund. The San Francisco, California-based Unity Software provides a platform to create interactive and real-time 2D and 3D content. Many popular games in the video game industry rely on its Unity gaming engine.
Management reported Q4 2021 results on Feb. 3. Revenue increased 43% YOY to $316 million. Non-GAAP loss declined to $12 million, or 5 cents lost per share, down from $20.1 million. Cash and equivalents ended the quarter at $1.1 billion.
Unity Software continues to benefit from the growing demand for real-time 3D content across various industries outside of video gaming. Automotive, aerospace and defense (A&D), architecture, engineering sectors have all witnessed increased adoption of the Unity engine.
Moreover, the emerging metaverse provides Unity with the perfect tailwind for further growth. As a result, the company anticipates an increase in its revenues of 35% YOY to $1.5 billion in 2022.
Unity currently trades around $80, down about 40% YTD. Shares are trading at 20.8 times trailing sales, down from 40 last year. Meanwhile, the 12-month median price forecast for Unity stock is at $157.50.
Cathie Wood Stocks: Vertex Pharmaceuticals (VRTX)
The final stock is Vertex Pharmaceuticals, found in the ARKG fund. The Boston, Massachusetts-based biotech name focuses on discovering and developing small-molecule medicines to treat serious diseases.
For instance, in treating cystic fibrosis (CF), Vertex enjoys a monopoly. It has various drugs for treating different genetic mutations.
Vertex announced Q4 2021 results on Jan. 26. Revenue increased 27% YOY to $2.1 billion. Non-GAAP net income came in at $866 million, or $3.37 per diluted share, up from $661 million in the prior-year quarter. Cash and equivalents ended the period at $7.5 billion.
The new next-generation combination drug Trikafta drove the top line growth in 2021. The drug is slated to help 90% of CF patients, a considerable step up from previous generation drugs. Currently, the company’s treatments are used by roughly half of the patients in the U.S., Canada, Europe and Australia. In addition, the company recently partnered with CRISPR Therapeutics (NASDAQ:CRSP) to develop a gene-editing therapy against beta-thalassemia and sickle cell disease.
VRTX stock currently hovers around $235, up 11% over the past year. Shares are trading at 16.1 times forward earnings and 8.1 times trailing sales. The 12-month median price forecast for Vertex stock stands at $275.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
