Ark Invest’s Cathie Wood is fresh off a must-needed year of relief, with her flagship Ark Innovation ETF (NYSEARCA:ARKK) soaring more than 70% year-to-date. Indeed, Cathie Wood stocks still have a long way to go if they’re to see new highs again.
Though new highs in 2024 seem unrealistic, I do believe that the trio of rate cuts the Federal Reserve has planned for next year could be the tailwind that disruptive innovation stocks need to take their rally to the next level. Either way, it’s hard not to want to bet on Cathie Wood stocks as it looks to sail into smoother, lower-rate waters from here.
Let’s have a look at three stocks in the ARKK that I find most intriguing for the new year:
Roku (ROKU)
Roku (NASDAQ:ROKU) stock has been on a great run so far this year, now up 153% year-to-date. Led higher by improvements in the ad market, Roku stands out as one of the most compelling recovery plays in the realm of Cathie Wood stocks.
Though I’d much rather wait for shares to pullback after more than doubling in a year, I do find DA Davidson’s recent comments on the company encouraging. According to the investment firm, Roku may be an “attractive takeout target,” perhaps through the eyes of a mega-cap tech firm seeking to expand exposure in the streaming markets.
My take is that Roku would be even better in the hands of a media-focused streamer that’s lacking in exposure on the hardware side. Undoubtedly, many of the mega-cap tech companies with exposure to streaming also have their own streaming sticks or something similar.
In any case, Roku remains a relatively small firm, with its mere $14.49 billion market cap at the time of writing, making it a bite-sized deal for any firm eager to make bigger strides in streaming. For now, I wouldn’t speculate on a takeover deal, as it’s hard to gauge where Roku goes from here if no acquirer steps forward.
Tesla (TSLA)
Electric vehicle (EV) firm Tesla (NASDAQ:TSLA) has been a standout performer for Cathie Wood’s ARKK fund over the past several years. Of late, though, Tesla stock has driven into a bit of a rough patch, sinking from its more than $400 peak in late 2021 to around $113 at its depths earlier this year. At writing, the stock’s going for just shy of $250 per share, up around 130% year-to-date.
Recently, Tesla recalled around 2 million cars due to “insufficient” Autopilot safeguards. For now, the headline doesn’t appear to be having a drastic impact on the stock. I view Autopilot as a nice-to-have feature for now. Give it a few years, though, and Autopilot capabilities may become a must as more self-driving technologies move into the mainstream. In any case, I wouldn’t make too much of the recall.
At around 77.2 times trailing price-to-earnings, I view Tesla stock as intriguing if you believe in Elon Musk and his firm’s AI prowess. As a tech company, a case could be made that the stock’s reasonably valued. However, as an auto company, it looks absurdly expensive. So, it really depends on your point of view! Either way, Tesla looks intriguing here as we look forward to what AI has to offer in 2024.
UiPath (PATH)
Speaking of AI, I find UiPath (NYSE:PATH) to be one of the most interesting AI stocks in ARKK right now. The company is in the business of automating repetitive tasks in the workforce. The stock’s been on a steady descent since it went live on the public markets back in 2021. Today, shares are off around 68% from their peak, but up more than 104% year-to-date.
Should three rate cuts be in the cards in 2024, hyper-growth companies with skin in the automation game could be in for another good year. UiPath is at 52-week highs, but there’s still a harsh macro climate to get through. Yes, low rates are a good thing, but it may prove tougher to compete in an arena where numerous enterprise software companies are in a rush to improve their AI capabilities.
My guess is that UiPath remains competitive, even as other industry players look to chase after the AI puck in the new year. That said, I wouldn’t bet on the stock as it appears the easy money’s already been made.
On the date of publication, Joey Frenette did not hold (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.
