Cathie Wood is struggling to get the balance right in her growth stock portfolios. The Ark Invest co-founder, CEO, and chief investment officer is losing to the market for the third time in the last four years. She's trying not to keep it that way.
Wood offers up the daily transactions across her half-dozen exchange-traded funds. What's she buying these days? Ark Invest added to existing positions in Ibotta (IBTA -0.33%), Roblox (RBLX -0.80%), and Guardant Health (GH -2.96%) on Thursday. Let's take a closer look.
1. Ibotta
There's no shortage of market debutantes this year that have faltered after the initial spark. Ibotta is the latest of the sinker stinkers. The digital marketing platform that rewards its growing user base for making purchases through its advertising partners went public at $88 in April, only to open at $117 on its first day of trading. It's all been downhill from there. The stock has gone on to shed more than half of its opening high, closing below $50 on Thursday.
Ibotta became a broken initial public offering (IPO) at the end of May after disappointing the market with its first financial update as a public company. The first quarter itself was fine. Revenue rose 43%, shy of the 52% growth it posted for all of last year but still ahead of analyst expectations. Earnings also topped Wall Street profit targets. However, guidance called for a more substantial top-line slowdown for the second quarter. This is a hard sell for an IPO.
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Ibotta has an intriguing business model. It offers a cash-back rewards program in which users of the free namesake app make money when they purchase -- in person or online -- from an Ibotta retail partner. Walmart (WMT -1.22%) is a partner as well as a minority shareholder in Ibotta.
As bad as the market reaction to the first report was, this month's second-quarter announcement was even worse. Revenue growth slowed to 14%, or 29% adjusted for a prior-year breakage benefit. This is actually better than the adjusted 25% increase it was targeting three months earlier, but adjusted net income rose by a mere 9%.
Making matters worse, guidance for the current quarter calls for adjusted revenue growth to decelerate to 12%. It's not a good trend. The stock plummeted 27% on its heaviest daily volume since the day it went public following the uninspiring report.
The platform is working. Ibotta has now reached more than 50 million accounts and has paid back more than $2 billion in rebates since its inception. One can argue that it may even be a recession-resilient play. If consumers are pinched, they're going to want to save money whenever they can. For retail partners, it's a great way to generate a lead and only have to pay when a sale is made.
Wood bought some Ibotta when it went public in April. She's been busy this week, adding to her early position at much lower price points in the last three trading days. She's not the only one who thinks the stock is cheap. Ibotta's board announced a $100 share buyback on Thursday. At current prices, this would be enough to repurchase most of the 2.5 million freshly minted shares from the IPO at almost half the price.
2. Roblox
Roblox stock is moving higher for the third consecutive month, but it's still trading lower in 2024. The online gaming platform developer saw its revenue increase 31% for the second quarter it posted earlier this month. The 31% increase in revenue is the second-strongest gain it has posted in the last two years. Red ink continues to be a problem, but its loss narrowed. It was a beat on both ends of the income statement.
Roblox also boosted its full-year revenue and bookings guidance. The platform's 79.5 million average daily active users has risen 21% over the past year. Average monthly unique payers and time spent on the platform are growing even faster, encouraging signs of monetization and engagement, respectively.
3. Guardant Health
The one Wood purchase on this list that's actually trading higher this year is Guardant Health, but its 3% gain in 2023 is still well short of the market averages. Revenue rose 29% for the developer of oncological tests in the financial update announced earlier this month. Guardant also boosted its full-year revenue outlook.
Guardant is still years away from reported profitability, but it has a compelling pipeline of clinical or biopharmaceutical tests. Its own forecast calls for revenue to triple by 2028. A lot will have to go right for that to happen, but Wood doesn't mind waiting for growth projections to play out and pay off.