Cathie Wood and her team at Ark Invest are famous for investing in companies with innovative technologies. By examining her team's trades, investors can identify the stocks they believe will emerge as winners.
1. The Trade Desk
The Trade Desk is an advertisement technology company, and its software allows advertisers to understand who is viewing the ad and decide if they should buy it. The Trade Desk can apply various bid factors through an instantaneous bidding platform to ensure its clients get the best bang for their buck. The company operates in multiple mediums, including podcasts, connected TV, online video, and generally anywhere you'd see digital ads.
The Trade Desk's market opportunity will only increase as the world moves toward a more digital society (such as away from linear TV and more toward streaming). This bodes well for the company; however, its latest results weren't the greatest.
In Q3, The Trade Desk's revenue increased by 25%, which is respectable in its own light. However, guidance was disappointing, as management guided for 18% revenue growth, which would be the company's second-lowest pace on record. For a company that should be capitalizing on the digital transition, a growth slowdown isn't what investors want.
As a result, The Trade Desk's stock has fallen over 10% since it reported earnings in early November. Ark Invest took advantage of the decline and has purchased nearly 630,000 shares since it reported earnings or about $43 million worth as of today's prices.
I'm not worried about the short-term slowdown for The Trade Desk, as the long-term opportunity is still there. I think scooping up shares on sale is a great idea, and Ark Invest is already leading the way on this idea.
If you've been to a restaurant recently, you may have noticed waiters walking around with a white mini-tablet that they give you to pay your bill. This is just one of the products from Toast, but it's not the best reason to invest in the company.
Toast sells its clients (restaurants) an entire ecosystem, including point-of-sales hardware and software, gift cards, payroll, mobile ordering, and any other capability a restaurant needs to succeed today. While the hardware may bring in one-time revenue for Toast, its recurring model makes it an exciting investment for Ark Invest. In Q3, Toast had an annual recurring revenue (ARR) figure of $1.22 billion, with 43% of locations using at least six elective products.
It also has a massive and growing footprint, with the number of locations using Toast's products rising from 74,000 last year to 99,000 in Q3. This equates to a very healthy business, with its total revenue rising 37% and subscription revenue rising 46%.
Despite this success, Toast trades at an all-time low valuation of just 2.2 times sales.
This is an incredibly cheap price for a company growing quickly and near to turning a profit (Toast's operating loss margin in Q3 was just 5.7%).
The upside for Toast's stock is high, and with the company continuing to grow rapidly and improve its profit margins, it makes for a no-brainer buy right now.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.