These are challenging times for Cathie Wood's style of investing. The co-founder, CEO, and investor at Ark Invest finds her family of aggressive growth exchange-traded funds losing to the market for the third time in four years in 2024. Can she get back on track? She is certainly not standing still.
Ark Invest made plenty of moves on Tuesday, adding to nine of her existing positions. Roku(NASDAQ: ROKU), Blade Air Mobility(NASDAQ: BLDE), and PagerDuty (NYSE: PD) are some of the names on that shopping list. Let's take a closer look.
1. Roku
It's not just Roku's 81.6 million households that are binge viewing on Roku. Wood has added to her position for four consecutive trading days. Is "binge investing" a thing? Ark Invest now owns more than 9% of Roku's total shares outstanding.
Like many of the stocks that propelled Wood's funds to market-thumping returns in 2000 and then again in 2023, Roku was a rock star last year. Shares of the streaming video platform more than doubled. This year has been anything but a welcome rerun. Roku has tumbled 40% in 2024, a laggard that's buffering in an otherwise buoyant market.
Image source: Getty Images.
Roku is still growing. The number of households leaning on Roku's operating system to fuel their TV streaming has risen 14% over the past year. Engagement is even better, as the hours streamed in its latest quarter soared 23% in its latest quarter.
There are a couple of things holding Roku back. After a brief profitable run, Roku has now rattled nine consecutive quarterly deficits. It has come through with three straight quarters of positive free cash flow -- and nine-figure free cash flow, at that -- but investors will applaud the moment that Roku returns to actual profitability.
Another thing holding Roku back is the fear that Walmart entering this space after announcing plans to acquire a small Roku rival could prove disruptive. This isn't ideal, but it doesn't seem like a game changer. Regulators have yet to approve the deal, and even if it does clear antitrust hurdles it's not as if Roku isn't ready. It's been battling some of the country's most valuable consumer and consumer tech companies for years. It's more than holding its own.
Average revenue per user has also been sluggish, but Roku could be turning that corner. It has experienced just one sequential decline in the last four quarters on that front. With streaming hours outpacing active user growth it's just a matter of time before advertisers spend more of their money where viewers are spending more of their time.
2. Blade Air Mobility
Compared to Roku's 40% year-to-date plunge, Blade Air Mobility's 9% dip in 2024 is a small air pocket of turbulence. Blade Air provides on-demand helicopter transport services, primarily to get well-to-do passengers from airports to city centers in densely populated markets. Getting from JFK to the heart of Manhattan in just five minutes obviously has its appeal if you can afford the convenience. Blade also works with hospitals and other medical partners for the timely transport of organs.
Revenue rose 14% to $51.5 million in its latest quarter, and the top-line jump would've been 22% if you back out the BladeOne scheduled jet service between New York and South Florida that it discontinued last year. Margins are improving, but it's still a couple of years away from profitability.
Growth has slowed from the torrid pace in 2021 and 2022 when revenue more than doubled in back-to-back years. There are a few publicly traded players in this high-end, short-flight air transport niche, but Blade stands out as an early player. It's investing in high-tech and carbon-neutral electric vertical aircraft to keep up with some of the younger players, but the market for short flights will be a long battle.
3. PagerDuty
PagerDuty is down just 5% this year, but it's been a frequent purchase for Ark Invest lately. Wood has added shares of the cloud-based provider of enterprise analytics and uptime monitoring every single trading day in June.
PagerDuty's slowing growth is a concern. It's been consistently decelerating for nearly two years, going from 34% top-line growth to just 8% in its latest financial update.
- Q2 2023: 34%
- Q3 2023: 31%
- Q4 2023: 29%
- Q1 2024: 21%
- Q2 2024: 19%
- Q3 2024: 15%
- Q4 2024: 10%
- Q1 2025: 8%
It's not just Wood who's taking a shine to PagerDuty this month. Craig-Hallum analyst Chad Bennett assumed coverage of the stock two weeks ago, lifting the firm's rating from hold to buy. He also bumped the stock's price target from $21 to $30, translating into 37% of potential upside from where it's at now. With top-line growth expected to accelerate later this year and PagerDuty posting double-digit percentage beats on the bottom line over the past year, it could be the right call.
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Rick Munarriz has positions in Roku. The Motley Fool has positions in and recommends PagerDuty, Roku, and Walmart. The Motley Fool has a disclosure policy.
