This hasn't been a great year for high-growth tech stocks, but many famous investors have gotten rich by acting greedy when everyone else is too scared to buy. ARK Invest CEO and founder Cathie Wood knows this and is using the ongoing growth-stock beatdown to average down on stocks she was previously willing to pay an arm and a leg to acquire.
You might not run extremely popular exchange-traded funds (ETFs) like Wood does, but that doesn't mean you can't take advantage of beaten-down prices for Shopify (SHOP), Twilio (TWLO), and Teladoc Health (TDOC) right now. Here's why Wood thinks they can bounce back.
1. Shopify
This e-commerce giant has long been one of Wood's favorite bets. Now that it's tumbled 73% from the high-water mark it set last November, she appears eager to average down. On Monday, she bought more shares for a fraction of the amount she was willing to pay less than six months ago.
Shopify gives merchants everything they need to build and run a direct-to-consumer (DTC) business, and fulfillment services are a big part of its attraction. Shopify stock has been tanking in part because the company intends to use its profits to build new warehouses in an attempt to bolster fulfillment services.
Amazon recently fired a shot across Shopify's bow with its new Buy With Prime program. This lets DTC retailers who already use Amazon's fulfillment service add a Buy With Prime button to their site's shopping cart. With around 200 million consumers who already pay for Prime's free ultra-fast shipping and returns, Buy With Prime could pour water on Shopify's growth initiatives.
Luckily, Shopify is taking big steps to grow its international audience. In 2021, it acquired a significant stake in Global-E Online, a provider of cross-border e-commerce solutions that help geographically-limited retailers reach consumers in North America and vice versa.
2. Twilio
Wood has been a big fan of Twilio and its cloud-based communications platform for years. It was a big benefactor of pandemic-related lockdowns that forced everyone to communicate at a distance.
With workers returning to their offices, demand has been a bit softer than expected, and investors are losing their minds. The stock has tanked by about 69% since it peaked last July.
Text messages, voice calls, videos, two-factor authentication, and other features that we've come to expect from mobile apps are a nightmare to develop from scratch. That's why Twilio's platform for developing a wide variety of communications technology is increasingly popular among the world's smartphone-application developers. The company finished 2021 with 256,000 active customer accounts, a 16% gain compared to a year earlier.
Twilio is doing more than just attracting lots of new developers. Revenue per client is another important metric moving in the right direction. In 2021, the average client that had been with Twilio for at least a year spent 31% more than it did in 2020.
The ongoing demise of cookies on web browsers makes engaging customers through their smartphone applications more important than ever. With this in mind, I expect developers to continue beating a path to Twilio's door for years to come.
3. Teladoc Health
This is another stock that shot up during the pandemic only to come crashing down. Wood was a Teladoc buyer as the stock was on the rise in 2020, and she's accelerated those purchases now that it's trading about 79% lower than it was at its peak in January of 2021. Now, ARK Invest owns around 11% of the company, and it's one of Wood's biggest bets to date.
Teladoc stock has been tanking because it got way too far ahead of itself in the pandemic's early days, and not due to poor performance. Fourth-quarter revenue soared 45% year over year to more than $2 billion and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) jumped 53% to $77 million.
The number of competing telehealth services is growing, but none can offer new clients a suite of services that compares to Teladoc Health. With profits that the company can use to stay steps ahead of the competition, Teladoc's user base of about 54 million paid members will most likely stick around.
The number of platform-enabled sessions Teledoc facilitated in the fourth quarter dropped 10% year over year to 982,000. News of another drop when the company reports first-quarter earnings could lead to another severe market beatdown. If you want to follow Wood into this stock, it's probably best to do so in limited quantities.
Should you invest in Shopify Inc. right now?
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Originally published on Fool.com
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Cory Renauer owns Global-e Online Ltd. The Motley Fool owns and recommends Amazon, Global-e Online Ltd., Shopify, Teladoc Health, and Twilio. 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.
