It's not just consumers picking up the shopping pace this holiday season. Ark Invest founder and tech investor Cathie Wood has been busy the last few trading days loading up on some of her positions. What's she buying now?
Wood added to her existing stakes in Nextdoor (KIND), Genius Sports (GENI -1.24%), and The Trade Desk (TTD -1.68%) on Thursday. Two of the three stocks declined in an otherwise effervescent November, typical for Wood, who is often buying some of her favorite stocks when they're on sale. Let's take a closer look.
Nextdoor
You probably don't think of Cathie Wood as a value investor, but have you seen Nextdoor's balance sheet? The company behind the namesake hyperlocal discussion board platform has $540 million cash and short-term investments on its books, and just $68 million in net debt. This whittles down its market cap of $639 million to an enterprise value of just $168 million.
There are reasons for Nextdoor trading for just a little more than its net cash position, but first let's sing its praises. Nextdoor attracts 40.4 million monthly active users to its social platform, roughly a third of the homes in this country. The ad market is showing signs of turning the corner, a pretty big deal since Nextdoor is a free hub that leans on advertising for the lion's share of its business.
Image source: Getty Images.
Now let's turn to the darker side of Nextdoor. It's not profitable, and analysts don't see that changing anytime soon. Nextdoor made up for its lack of positive earnings when it went public as a special purpose acquisition company (SPAC) in late 2021 with heady top-line growth. Revenue was consistently increasing by 45% or better at the time. It's coming off of back-to-back quarters of 4% revenue growth, and that's an improvement over the back-to-back quarters of top-line declines it posted before that.
Nextdoor could also be in a funk when it comes to growing its reach. Its active users have climbed 6% over the past year, but it has posted sequential dips in each of the two previous quarterly updates.
The good news beyond the ridiculously low enterprise value for a household name is that business is already turning the corner. Average revenue per user is higher now than it has been at any point over the past year. Nextdoor just needs to ride the tide of the online advertising market improving, but even if that doesn't happen it wouldn't be a surprise if a private equity firm doesn't acquire it for a reasonable premium. The enterprise value is too low for a company with this kind of reach.
Genius Sports
The only stock of the three to move higher in November is Genius Sports. The sports data specialist that athletics leagues, media companies, and betting outposts rely on for real-time information moved higher despite taking an initial hit after posting mixed third-quarter results in Nov. 13.
Revenue rose 29% to $102 million, ahead of the $100 million it was modeling three months earlier. It delivered double-digit-percentage growth across all three of its operating segments. The $126 million it's now forecasting for the current quarter may seem like a big sequential step up, but it's less than 20% ahead of where it landed on the top line a year earlier for the seasonally potent fourth quarter.
Losses remain a problem for Genius Sports. Analysts don't see it turning that corner until 2025, but Wood is fine betting early on potentially disruptive growth stocks that are currently in the red.
The Trade Desk
November was kind to most growth stocks, but The Trade Desk was essentially flat. Shares of the programmatic advertising leader declined 0.7% last month, but it doesn't mean that the shares weren't volatile. The Trade Desk soared through the first few trading sessions of the year, but all of that changed when it put out poorly received third-quarter results.
The adtech bellwether exceeded analyst expectations for the third quarter, but guidance was problematic. The Trade Desk said it started to experience softness in brand spend in automotive and consumer electronics verticals since the second week of October. It did point out that advertiser spend began to stabilize in early November, but it still put out guidance for the current quarter that was below Wall Street targets.
The Trade Desk isn't broken. Comps this quarter will be challenging given the spike in elections-related marketing the fourth quarter of last year. Exclude those political spots and The Trade Desk expects to continue gaining market share with 22% year-over-year growth for the quarter. Buying The Trade Desk when its slips has worked out for Wood in the past.
