Wood has been a bull of Tesla for a long time.
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It’s just The Motley Fool, back with an April Fool’s joke. And you bought it!
Let’s be honest, we ALL want that magical stock that’s cheap, poised for world domination, AND endorsed by investing legends. But as tempting as those headlines are, they’re usually a recipe for April Fool’s style disappointment.
While we at The Motley Fool are all for hunting down those magnificent, no-brainer stocks set to soar, it’s crucial to remember the Foolish principles of investing. Diversify, think long-term, and yes, even on April Fool’s Day — especially on April Fool’s Day — keep your skepticism handy.
To be clear, no stock is truly worthy of the breathless promotion that brought you here. Cathie Wood’s and Warren Buffett’s stock portfolios have some stocks in common, but none that match our headline. For example, one name that they have in common dabbles in AI-driven financial services, but it has nearly tripled in 52 weeks and trades at 56 times earnings, so there’s no “beaten-down” quality and we wouldn’t call it a “no-brainer” buy today. (If you must know, the stock in question is Nu Holdings. Interested? Here’s a Foolish primer on how to research stocks.)
The reality is that no single stock can deliver every investor’s dream scenario. Let’s say someone actually made an unbelievable number of eyeball-magnet promises about a single stock in a headline that wasn’t meant as a joke. You would probably assume they had a nice bridge to sell you. And the stock should do your dishes, too.
99% of the time, you’d be right.
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That doesn’t mean there aren’t fantastic opportunities out there. Instead of chasing the impossible, our analysts and contributors focus on a realistic set of tactics that add up to a healthy investing strategy.
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Diversification for the win: Serious investors should hold at least a couple of dozen stocks in their portfolios, spread across various industries, geographic markets, and company-size cohorts.
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Undervalued potential: Great companies that have hit a rough patch can create a buying opportunity for long-term investors.
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The right mix: It can pay off to find stocks with some of the qualities Buffett loves (solid fundamentals) and a dash of the growth potential that thrills Wood.
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Investing shouldn’t be about chasing get-rich-quick schemes. If you can focus on building wealth over time through smart choices, you’ll be much better off.
And there is plenty to be excited about in this market, even if there aren’t any magic-wand ideas ready to make everyone smarter, happier, and richer all at once. Wall Street entered an official bull market in January, stretching back to the last bear market’s bottom in October 2022. Everyone is excited about AI stocks, stock splits, and initial public offerings. Even the crypto market sprang back to life recently, driving the leading digital assets to fresh all-time highs.
Investors are feeling the joy. The American Association of Individual Investors’ (AAII) latest investment sentiment survey saw the market mood leaning heavily bullish. It’s springtime for stock investors, and there’s no telling how far this bull market will run. Just keep a Foolish mindset and do your homework before hitting the “buy” button on any particular stock idea. Remember, great investors aren’t trying to time the market — they just give their money a lot of time in the market.
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Are You Looking to Buy a Beaten-Down, Magnificent, No-Brainer Stock Owned by Warren Buffett and Cathie Wood That’s Set to Soar Like an AI-Powered Rocket Today? was originally published by The Motley Fool
Ark Invest’s Cathie Wood is a big believer in Bitcoin (CRYPTO: BTC). She launched Ark’s first spot price Bitcoin exchange-traded fund (ETF) in January once regulators gave their approval.
Earlier this year, Wood raised her price target from $1 million to $1.5 million by 2027 — which would represent a whopping 2,139% jump from Bitcoin’s recent price of about $67,000. Wood expects that explosive growth to be driven by three tailwinds: the approvals of Bitcoin ETFs, institutional purchases of those ETFs, and the expected halving next month, which will cut the rewards for mining Bitcoin in half.
We should take those estimates with a grain of salt, since Wood has a habit of making wildly bullish predictions and not necessarily delivering; her flagship Ark Innovation ETF, for example, has only risen 13% over the past five years as the S&P 500 rallied 88%. That said, we should still consider whether Wood’s bullish thesis makes sense and if Bitcoin is worth buying.
The bull case for Bitcoin
The bulls believe Bitcoin will eventually join gold, silver, and other precious metals as a hedge against long-term inflation. Like the gold bugs, Bitcoin’s bulls believe that fiat currencies are destined to depreciate, and the trend will drive more governments, businesses, and investors to adopt the cryptocurrency. Up until this January, most of those people invested in Bitcoin in three ways: through direct purchases on a crypto exchange like Coinbase, through a trust like Grayscale Bitcoin Trust, and through ETFs that were pinned to Bitcoin futures.
But all three methods had drawbacks. Crypto exchanges were disconnected from the public stock exchanges, prone to sudden disruptions and outages, and frequently targeted by regulators. The collapse of FTX and the recent criminal charges against Binance also rattled investors’ confidence in stand-alone cryptocurrency exchanges.
Crypto trusts were more secure and could be actively traded on the stock market, but they charged high fees. Bitcoin future ETFs also charged high fees, but they often failed to keep pace with the cryptocurrency’s actual spot prices. The Securities and Exchange Commission’s approvals in January of the first 11 spot price Bitcoin ETFs resolved those issues; the ETFs charge low fees, are directly tied to Bitcoin’s spot price, and can be easily traded on the open market.
Wood believes those new ETFs will drive institutional investors to buy more Bitcoin. Back in December 2021, Wood predicted that if institutional investors allocated an average of 5% of their portfolios to Bitcoin, it would boost its near-term price by about $500,000. Wood reiterated that bullish view earlier this month and said that institutional buyers would drive Bitcoin’s price to $1.5 million as it’s recognized as a new asset class.
Meanwhile, Bitcoin will undergo its next halving in April. That process, which occurs every four years, cuts in half the reward for miners like Marathon Digital to mint new Bitcoin — but it might help boost Bitcoin’s price as market demand outstrips its slowing supply growth.
At the same time, persistent inflation and escalating geopolitical conflicts could drive more countries to adopt Bitcoin as a mainstream currency. That trend could accelerate Bitcoin’s transformation into a reliable, safe asset like gold and silver.
But is Bitcoin really headed to $1.5 million?
Cathie Wood isn’t alone in her bullish view for Bitcoin’s future. The British bank Standard Chartered says its price will hit $100,000 by the end of 2024, while the financial services giant Fidelity predicts its price will reach $100 million by 2035 and $1 billion by 2038. It’s impossible to say if those predictions will come true, but the approvals of the first spot Bitcoin ETFs could set a floor under its volatile price.
So instead of wondering if Bitcoin will deliver a 2,000% gain in just three years, investors should simply ask themselves if they believe the bullish argument. If Bitcoin sounds like a promising investment, then it might be smart to accumulate some Bitcoin or shares of a low-fee spot price ETF as a long-term growth play.
Should you invest $1,000 in Bitcoin right now?
Before you buy stock in Bitcoin, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Bitcoin wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Coinbase Global. The Motley Fool recommends Standard Chartered Plc. The Motley Fool has a disclosure policy.
1 Top Cryptocurrency to Buy Before It Soars 2,139%, According to Cathie Wood was originally published by The Motley Fool
While many have made claims on where they see Bitcoin going in the future, very few are as notable as the predictions made by Ark Invest CEO Cathie Wood. Her base case for 2030 is a Bitcoin price of $600,000, almost 10 times that of the current price. In her bull case, she sees Bitcoin reaching $1.5 million by 2030. If Bitcoin were to reach a $1.5 million price level, the market cap would be more than $30 trillion.
Her initial bull case prediction was $1 million, but she upped it to $1.5 million after the approval of the Bitcoin spot ETFs, among other factors. Specifically Wood pointed to more long-term and institutional holders, more holders in general, a rising hash rate and the ETFs.
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ARK and 21Shares launched one of the ETFs (ARKB). The ETF has the third lowest expense ratio out of the active spot ETFs and has garnered net assets of over $2 billion in less than 2 months.
The ETF has largely been a success, attracting huge inflows and performing well against the market, up nearly 60% in the past month alone.
ETFs as a whole have also changed the dynamics of Bitcoin supply. Before, a handful of institutions were involved in Bitcoin, and prices were a bit more skewed towards retail trader sentiment. However, with new buying activity, some predict a supply squeeze could be on the horizon.
Inflows to the ETFs hit an all-time high last week, seeing nearly $680 million of inflows in one day. This means that the funds are buying more Bitcoin every day, which is eating away at the liquidity provided by sellers.
Additionally, the ETFs have seen net inflows of several billion dollars since they began trading. The trend has been one of continuous buying. If this trend of daily buying were to continue, the entire liquid supply of Bitcoin (~1.3 million BTC) would be under ETF management by September 2024.
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Trending: Large boom in cryptocurrency and metaverse interest as BTC skyrockets — has Apple Vision Pro increased the demand for virtual real estate?
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While this is extremely unlikely to happen as more traders would take profit if the price of Bitcoin continues to go higher and ETF inflows are likely to slow down, it still shows how close the market is to reaching the capacity of liquid sellers in the order books.
A better idea to consider is thinking about the point at which traders will begin to sell. While some believe that the current ATH of around $69,000 could serve as a point of resistance and take-profit level, others are looking at high prices, such as $100,000. Few are venturing even higher, such as Wood.
The price of Bitcoin is determined by the laws of supply and demand. It will be interesting to see how the new demand brought by the ETFs will impact the supply of sellers in the coming months and years.
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This article Bitcoin Supply Squeeze? ARK Invest’s Cathie Wood Predicts $1M+ Bitcoin Price originally appeared on Benzinga.com
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Cathie Wood became an investing hero when her exchange-traded funds (ETF) that focus on disruptive technology stocks zoomed higher early in the pandemic, outperforming the market and delivering incredible gains for shareholders.
That changed in the bear market when investors dumped growth stocks and ran toward safe stocks. But as the market has swung back firmly into bull territory, many of Ark Invest’s funds are outperforming again.
Ark has been scooping up shares of digital bank SoFi (SOFI -0.56%) stock recently, adding more to two of its ETFs. Should you follow Cathie Wood’s lead?
How SoFi stands out
SoFi is in the rather interesting position of being a bank and a fintech. It has some stability due to its large cash reserves in the form of account deposits and a well-established credit business, but there’s risk — and reward — due to its youth and innovation mindset.
It began as a cooperative for student loans, and it grew from there as management recognized the need for a full financial services center geared toward the needs of students and young professionals.
Chief Executive Officer Anthony Noto spoke with Cathie Wood and called SoFi’s sweet spot “mass, affluent high earners.” He doesn’t think their needs are being met, and SoFi is going after this unfulfilled space with a one-stop shop to provide everything they need to manage their finances easily. This is a group that is educated and earning; more than 90% of SoFi’s accounts are direct deposit. These clients are making money, and these are sticky deposits.
SoFi’s goal now is to capitalize on this lucrative market. It’s developing all sorts of initiatives to run with this ball: IPO investments and alternative investments, all with an easy-to-use interface. These are customers who have some discretionary income but need some help to build it to a level of achieving their financial ambitions. When SoFi provides that, it gains their trust and leverages its accounts to generate fees and revenue, scaling its business and becoming more profitable.
SoFi just reported its first GAAP profit
SoFi has been demonstrating growth and momentum since it became a public company, but its stock tanked in the bear market when unprofitable growth stocks at high prices fell out of favor with investors. However, SoFi has continued to report remarkable growth and sustained momentum, capturing market share and demonstrating that it has a viable business meeting its customers’ needs. There are many digital banks that have sprouted that offer easy online banking, but SoFi has shown a keen understanding of its clientele and how to expand its business.
That’s why it has a range of products in three segments: the original lending products, financial services, and technology platform. Its strategy is to get clients in its affluent target market to sign up for an account, bringing them into the company’s ecosystem where it cross-sells other services to become their preferred financial services institution.
Management reiterated several times that it would report a profit in accordance with generally accepted accounting principles (GAAP) in the 2023 fourth quarter, and it came through with $48 million in net income off of $615 million in revenue. Even better, it’s anticipating another profit in the first quarter as well as a full-year profit of about $100 million.
SoFi’s price drop is an opportunity
Although Cathie Wood’s approach is often seen as the opposite of value investor Warren Buffett’s, they aren’t diametrically opposed. Wood recognizes a bargain as well as any savvy investor, and although she goes for growth and disruption, she isn’t passing up the chance to buy an incredible stock at a great price.
SoFi stock soared after its fourth-quarter report, but then it immediately plummeted, losing all of its gains. It’s now up only 9% over the past year despite its stellar performance. At the current price, it trades at a price-to-sales ratio of 3.8, which is cheap for a high-growth stock.
If you have a high tolerance for risk and love growth stocks, you might want to invest in one of Cathie Wood’s ETFs, like the flagship ARK Innovation Fund (ARKK 0.79%) or the ARK Fintech Innovation Fund (ARKF 1.23%), both of which just loaded up with SoFi stock. Or, you can follow her trades and make your own decisions.
SoFi’s drop looks like an opportunity for the forward-thinking investor, and with patience and time, you’re likely to be rewarded.
In this video, I will be going over Teladoc‘s (TDOC -23.67%) fourth-quarter earnings and discuss whether now is a good time to open a position with the stock back to its all-time lows.
*Stock prices used were from the trading day of Feb. 20, 2024. The video was published on Feb. 20, 2024.
Neil Rozenbaum has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Teladoc Health. The Motley Fool has a disclosure policy. Neil is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.
One of the most followed investors on Wall Street is Ark Invest Chief Executive Officer Cathie Wood. Wood has earned a reputation for being a fierce supporter of emerging technology trends in areas such as electric vehicles (EVs), artificial intelligence (AI), and genomics.
From time to time, Ark Invest releases research to the public — providing investors with a glimpse of the data and work behind Wood’s forecasts. Given her high interest in technology, it’s probably not a surprise to learn that Wood is a proponent of Bitcoin (CRYPTO: BTC).
While she is not the only institutional investor heavily supporting Bitcoin, she is certainly one of the most bullish. Two weeks ago, Ark Invest released its annual Big Ideas report for 2024. One of the standouts from the presentation was Wood’s latest outlook on Bitcoin.
Although she does not specify an exact timeline, Wood is calling for Bitcoin to reach a price of $2.3 million per token — this represents more than 4,000% upside to Bitcoin’s current price.
So, is now the time to pour money into Bitcoin? Let’s dig into Wood’s case, and assess whether Bitcoin is right for you.
A breakdown of Cathie Wood’s latest take on Bitcoin
Bitcoin is unlike other asset classes such as stocks or bonds. Generally speaking, during times of economic instability, investors may consider alternatives such as real estate, art, or commodities such as gold.
Although crypto is a fairly nascent asset class, Bitcoin in particular carries some overlapping features with gold because both are considered scarce. For this reason, some view assets like gold or Bitcoin as a haven or store of value. In fact, some investors refer to Bitcoin as digital gold.
At a high level, Wood sees Bitcoin as an important component of portfolio structure in order to mitigate risk. However, the more important detail is how much weighting Bitcoin should represent in her view.
The table below illustrates Wood’s proposed portfolio allocation:
|
Asset Type |
% Allocation |
|---|---|
|
Gold |
40.7% |
|
Equities |
30.3% |
|
Bitcoin |
19.4% |
|
Commodities |
9.6% |
|
Bonds |
0% |
Source: Ark Invest Big Ideas Report 2024.
At an allocation of almost 20%, it’s clear that Wood believes Bitcoin should be a prominent fixture in a diversified portfolio. In order to derive Wood’s $2.3 million price target, there’s a little more number crunching required.
According to Ark Invest, the global investable asset base stands at $250 trillion. In other words, this is the amount of money that could theoretically be deployed in the markets. Moreover, as I stated above, Bitcoin is a scarce asset, and only 21 million coins will ever enter circulation. As of now, roughly 19.6 million Bitcoins have been mined.
If you take Wood’s proposed Bitcoin allocation of 19.4% and multiply by the $250 trillion investable asset base, she is calling for a total of $48.5 trillion to be allocated toward Bitcoin. If this sum were to buy up the 19.6 million Bitcoin currently in circulation, that would yield a price of about $2.3 million per token.
Now that the math equations are out of the way, you’re probably wondering how likely this is.
What could fuel more interest in Bitcoin?
Although the above analysis is entertaining, it’s merely a fun exercise with numbers. The reality is that Bitcoin’s price — like other assets — will be determined through the dynamics of supply and demand. Maybe a 19.4% allocation to Bitcoin could be viewed as too high, but I do agree with Wood that an enormous amount of money will be needed to significantly push the price of Bitcoin higher. For this to happen, I think more institutional ownership is required.
As it stands today, Bitcoin is still viewed as highly speculative. Crypto does not have as many use cases as traditional fiat currency, and the jury is out on whether Bitcoin and other coins are here to stay long term. However, there are some notable items to discuss which could spur more interest in Bitcoin from larger money managers.
Earlier this year, the Securities and Exchange Commission (SEC) granted approval for a number of spot Bitcoin exchange-traded funds (ETFs). The main purpose of these products is to track the performance of Bitcoin without requiring investors to invest directly in the coin.
If these vehicles are successful and garner significant interest, it is possible that larger investors will consider exploring crypto more deeply and potentially allocate some funds toward Bitcoin. As Wood’s math demonstrates, the price of Bitcoin should rise meaningfully if this happens at scale.
Should you invest in Bitcoin?
I find Wood’s Bitcoin forecast interesting and applaud her for sticking to her strong conviction. However, calling for a nearly 4,300% increase from Bitcoin’s current price seems a little outlandish.
I do agree that over time, more institutional money will flow toward Bitcoin. But to me, the biggest question marks are how long it could take for Bitcoin to become accepted as mainstream, and even if it does, how much allocation the asset will represent in a portfolio.
The risk-reward dichotomy in owning Bitcoin can’t be misunderstood. While there is a lot of money to be made, just as much can be lost. Although this can also be said about other asset classes such as stocks, Bitcoin simply does not have the same features.
Unlike a stock, Bitcoin does not produce earnings or cash flows, pay dividends, or have a management team with a strategy. There isn’t even a clear regulatory framework. It truly is a decentralized, high-risk investment choice.
Given the amount of uncertainty around Bitcoin, investors should think long and hard before going into the coin or the crypto market in general — no matter what the potential upside looks like.
Should you invest $1,000 in Bitcoin right now?
Before you buy stock in Bitcoin, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Bitcoin wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of February 12, 2024
Adam Spatacco has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
Should You Buy This Top Cryptocurrency Before It Surges by More Than 4,000%, According to Cathie Wood? was originally published by The Motley Fool
She’s at it again: Cathie Wood, the head of Ark Invest, is snapping up shares of Tesla (TSLA 2.12%) with purchases worth more than $160 million so far in 2024.
Is it a brilliant move or a huge mistake? Here’s what you need to know.
What’s going on
As noted above, Wood and her team have purchased over $160 million worth of Tesla stock since the start of the year. Wood’s flagship fund, the ARK Innovation ETF (ARKK 2.37%), now owns about $640 million of Tesla stock, making the company the fund’s second-largest holding behind Coinbase.
| Ticker | Company Name | Market Value (in millions) | Weight |
|---|---|---|---|
| COIN | Coinbase Global | $628.1 | 8.11% |
| TSLA | Tesla | $626.7 | 8.09% |
| ROKU | Roku | $625.1 | 8.07% |
| PATH | UiPath | $490.1 | 6.33% |
| SQ | Block | $489.6 | 6.32% |
Data from ARK-funds.com as of Feb 7, 2024.
ARK Invest remains bullish that Elon Musk and the rest of Tesla’s management team will find a way out of the predicament they’ve found themselves in following a disappointing fourth-quarter earnings report and weak guidance.
To recap, Tesla’s gross margins continue to crater, reducing its appeal over rival automakers.
Data by YCharts.
Furthermore, the company issued lackluster guidance for vehicle volume growth in 2024, blaming the ramp-up to its next-generation model, which is due in 2025.
At any rate, Wood’s massive bet on Tesla shows that she believes brighter days are ahead for the company. But what’s her exact thesis?
Wood’s Tesla thesis, valuation, and Elon Musk
In short, Wood and her team are taking the long view on Tesla. ARK Invest has a price target of $2,000 on the stock owing to its ability to perfect and monetize its full self-driving (FSD) software. Moreover, Wood believes the company can parlay its FSD breakthroughs into a fleet of robotaxis that could revolutionize transportation, allowing society to rethink how people and cargo move from place to place.
In any event, Wood is placing a big bet on a company with an expensive valuation. Tesla’s shares trade with a price-to-earnings (P/E) multiple of 43, despite the recent sell-off.
Data by YCharts.
Given its valuation, Tesla is not a stock for value investors or those who are income-oriented. Rather, it’s a stock for growth investors with a long time horizon.
However, for those inclined to that investing style, the current dip in Tesla shares may offer an opportunity, one that Wood has already pounced on in the past several weeks. If Musk has proven one thing on his way to becoming the world’s richest person, it’s that he knows how to rally when the chips are down.
Jake Lerch has positions in Tesla. The Motley Fool has positions in and recommends Block, Coinbase Global, Roku, Tesla, and UiPath. The Motley Fool has a disclosure policy.
Cathie Wood and Warren Buffett don’t have a ton in common.
Buffett is an investor who traditionally seeks steady growth and often looks for dividend plays. This simple investment strategy has become a modern-day staple for investors of all ages. On the other side, Wood has taken bullish stances on emerging markets such as artificial intelligence (AI), genomics, and many others.
Buffett, who long averted investments in the technology sector, shocked the world back in 2016 after taking a sizable position in Apple. The iPhone maker has rewarded Buffett handsomely, and now comprises nearly 50% of his Berkshire Hathaway portfolio.
While Buffett owns a finite number of stocks in the technology sector, there is one AI company in particular that he shares with Wood. E-commerce and cloud computing leader Amazon (NASDAQ: AMZN) are both held in Berkshire Hathaway and Wood’s exchange-traded funds (ETFs).
Investing along the lines of Buffett and Wood puts investors in some pretty good company. Let’s dig into Amazon stock and assess if now is a good opportunity to scoop up some shares.
How is Amazon disrupting AI?
To be clear, Wood and Buffett have each owned Amazon for several years — well before all the hype surrounding AI came about. Nevertheless, interest in artificial intelligence (AI) fueled tech stocks in particular last year and largely contributed to meaningful gains in the S&P 500 and Nasdaq Composite.
When it comes to AI, it seems like the majority of the chatter is garnered by Microsoft-backed ChatGPT. In addition, demand for semiconductors used to train generative AI models has resulted in a lot of attention around Nvidia and Advanced Micro Devices in particular. While it’s easy to become captivated by these exciting developments, investors should remember that there are many other players quietly making inroads in AI.
For Amazon, the company’s multibillion-dollar investment in an AI start-up called Anthropic could carry some lucrative tailwinds. As part of the deal, Anthropic will be using Amazon as its primary cloud provider. Over the last year, a sluggish macroeconomy has significantly impacted Amazon’s cloud growth.
However, the new partnership with Anthropic could be an opportunity to return to accelerated growth. Furthermore, Amazon’s new managed service, called Bedrock, is already experiencing positive momentum as applications leveraging large language models (LLMs), among other tools, become more of a fixture for corporate IT budgets.
Some things to keep in mind
When it comes to owning Amazon, there is something deeper that Wood and Buffett both share: The stock is an extremely nominal holding for them. For Wood, Amazon comprises just 0.06% of her total portfolio. Furthermore, the e-commerce giant represents a mere 0.40% of Berkshire Hathaway.
It’s important for investors to understand that following the moves of larger, more prominent funds is not a guarantee for success. Although institutional support can be viewed as a positive, investors should not take a position in a certain stock or asset just because a notable money manager did so.
Amazon stock looks like a bargain
The chart illustrates the price-to-sales (P/S) multiple for Amazon benchmarked against a cohort of other megacap tech enterprises. At a P/S of just 2.9, Amazon is the least expensive stock in the “Magnificent Seven” based on this metric. Interestingly, this P/S level is also very much in line with Amazon’s 10-year average of 3.1.
I find this intriguing because over the last decade, Amazon has achieved quite a bit. The company is an undisputed leader among cloud providers, fending off stiff competition from the likes of Microsoft, Alphabet, and Oracle. Moreover, Amazon has entered several other end markets, including streaming and advertising. Now, with artificial intelligence being at the center of the next evolution of Amazon Web Services, the company’s return to accelerated revenue and free cash flow looks very much in sight.
I think investors are broadly miscalculating — perhaps underappreciating — Amazon’s potential within the AI landscape, and as such are discounting the stock relative to its peers. In turn, investors have been presented with a unique opportunity to buy shares at an attractive valuation. Now looks like a great time to employ a dollar-cost averaging strategy and begin building a long-term position in Amazon stock.
Should you invest $1,000 in Amazon right now?
Before you buy stock in Amazon, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of January 22, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Berkshire Hathaway, Microsoft, Nvidia, and Oracle. The Motley Fool has a disclosure policy.
Cathie Wood and Warren Buffett Own This Artificial Intelligence (AI) Stock. And It Looks Dirt Cheap Right Now. was originally published by The Motley Fool
There never seems to be a bad time for Cathie Wood to reshape her portfolios. The founder, CEO, and main stock-picker for the Ark Invest family of exchange-traded funds has been busy adding to some of her positions this week. She has also been pruning some of her holdings, but let’s talk about the buys.
Wood added to existing positions in Meta Platforms (META 0.64%), Recursion Pharmaceuticals (RXRX -1.25%), and Ginkgo Bioworks (DNA 1.61%) this week. Let’s take a closer look.
1. Meta Platforms
One of last year’s biggest winners was Facebook parent Meta Platforms. The stock nearly tripled last year, up 194%. I know I wasn’t the only investor who shook my head when Facebook changed its corporate moniker to Meta in the fall of 2021. I guess CEO Mark Zuckerberg is getting the last laugh now.
The social media giant’s dream of embracing the virtual realm of the metaverse hasn’t exactly been fulfilled. The Meta Quest virtual reality headset remains a niche product. However, its family of apps that includes Facebook, Instagram, and WhatsApp remains ridiculously magnetic, attracting 3.96 million monthly active users.
Image source: Getty Images.
Revenue rose 21% to a whopping $34.2 billion in constant currency in its latest quarter. A 31% jump in ad impressions across its offerings was the biggest driver, even if the average revenue per ad took a 6% dip.
Despite the stock’s surge since bottoming out in late 2022, Wood believes that it can keep going higher. Why else would she have bought more shares of Meta on Monday? She wasn’t the only one feeling more bullish about Meta. Citi raised its price target on the shares a day later.
Citi analyst Ronald Josey is bumping the stock’s price target from $425 to $440, naturally sticking to a bullish buy rating. Josey’s read is that the online advertising market got stronger in the fourth quarter, and that bodes well heading into Meta’s financial update next week. The successful monetization of Facebook’s Reels, promising new ad products, and its overall sticky engagement make the stock Citi’s top internet stock for 2024.
2. Recursion Pharmaceuticals
If you follow Wood’s daily market transactions it’s obvious that she’s warming to Recursion Pharmaceuticals in a major way. She has added to her position for 12 consecutive trading days through Wednesday of this week. Unlike Meta — a household name and one of just six stocks with market caps north of $1 trillion — Recursion is a small stock with a $2.2 billion market cap.
Recursion is a clinical stage techbio company. It offers an operating system that leverages machine learning algorithms and searchable biology and chemistry relationships to help speed up the development of potential treatments. It has just $47 million in trailing revenue, and it’s understandably years away from profitability. However, it’s been striking deals to expand the reach of its Recursion OS platform and beef up its artificial intelligence goals. Wood’s fresh purchases now find her owning more than 10% of Recursion’s outstanding shares.
3. Ginkgo Bioworks
Many of Wood’s stock purchases have been in the biotech space. She has now added to her Ginkgo Bioworks stake for six straight trading days. The biosecurity and biofoundry specialist posted mixed financial results in its latest quarter, but it comforted investors earlier this month by announcing preliminary financial results for fiscal 2023.
It continues to expect to report between $250 million and $260 million in revenue for all of last year, based on preliminary unaudited estimates. Ginkgo Bioworks is encouraged by its strong performance in cell engineering revenue and cash-rich balance sheet. Wood is a believer. She now owns nearly 11% of the stock’s total shares.
Citigroup is an advertising partner of The Ascent, a Motley Fool company. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.
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