Ark Invest founder and CEO Cathie Wood isn't receiving nearly as much acclaim in 2022 as she did a couple of years ago. Growth stocks that are heavy on innovation have been hit the hardest in this year's market sell-off. But if you think that would discourage her from buying more shares of her favorite businesses, you'd be wrong.
Wood isn't letting any grass grow under her feet while these growth stocks are trading at half the prices she was willing to pay for them a year ago. Already this month, she's averaged down on positions in Zoom Video Communications (NASDAQ: ZM), Shopify (NYSE: SHOP), and Block (NYSE: SQ).
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Zoom Video Communications
Wood's confidence for the leading provider of video-first communications hasn't fallen the way its share price has. Earlier this month, ARK Invest bought more shares of Zoom Video Communications despite their steep drop of around 41% since the beginning of the year.
Shares of Zoom have been falling along with just about every other tech stock that shot way up during the early days of the pandemic. The company also upset investors with softer-than-expected guidance for 2022. It turns out there are a lot of small businesses that no longer feel they need Zoom subscriptions now that they can bring employees and others together in person again.
Zoom faces a challenge with its smallest customers, but that segment isn't where the money is. A recent survey from consulting firm PriceWaterhouseCoopers found that the vast majority of U.S. employees whose jobs allow for remote work want to work remotely. At least they want to be able to work remotely often enough to justify their employers' Zoom subscriptions.
We can already see larger employers responding to worker demands in this tight labor market. During the three-month period that ended Jan. 31, the number of customers spending more than $100,000 annually with Zoom jumped 66% year over year.
Block
Recently, Wood also scooped up more shares of the company formerly known as Square. Shares of Block have lost more than a third of their value since co-founder and CEO Jack Dorsey stepped down from the lead role at Twitter to devote more energy to his innovative fintech business.
The stock price has been under extra pressure partly due to Block's recent acquisition of Afterpay. The buy-now-pay-later (BNPL) business could make Block more sensitive to rising interest rates. If a little interest rate exposure allows merchants to easily offer BNPL as a payment option for big-ticket items they might not have purchased otherwise, it's worth the risk.
Also, if you believe cryptocurrency is here to stay but you aren't sure what direction it's going to take, Block is a pretty good bet. Cash App, the company's personal payment platform, started allowing users to trade, send, and accept Bitcoin about five years ago, and the company holds thousands of Bitcoins to help facilitate transactions. Bitcoin payments have proven both popular and lucrative. In 2021, Cash App generated a $2.1 billion gross profit.
Shopify
Last year, Wood was happy to accumulate Shopify shares when they were trading above $1,000. It's no wonder she was willing to scoop up more shares this month when they were trading below $600.
Shares of Shopify plunged after the company's fourth-quarter earnings report. The total value of merchandise that Shopify had a hand in selling shot up 47% year over year in 2021 to $175.4 billion. Instead of forecasting a significant profit in 2022, though, management told investors to brace themselves. The company intends to reinvest nearly all the cash its operations generate into increasing its headcount and building self-operated warehouses.
A Shopify subscription can put a fledgling business on a more even footing with larger competitors when it comes to building an e-commerce website and accepting orders. The same can't always be said when it comes to fulfillment services. Shopify introduced its fulfillment network in 2019, and a self-operated warehouse that opened in Atlanta last year is already helping some merchants make the kinds of speedy deliveries their customers have come to expect from larger e-commerce players such as Amazon.
Since 2019, nearly 1 million merchants have launched businesses on Shopify. As it gains the ability to offer its clients a stronger fulfillment network, the number of them on its platform could keep soaring for years to come.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Cory Renauer owns Bitcoin and Block, Inc. The Motley Fool owns and recommends Amazon, Bitcoin, Block, Inc., Shopify, and Zoom Video Communications. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
