Cathie Wood Just Bought These 3 Stocks, Should You?

Cathie Wood Just Bought These 3 Stocks, Should You?

Posted On November 4, 2021 2:00 pm

Each of Cathie Wood’s investments now attract a lot of attention after the five-star investment manager delivered remarkable returns in 2020. The investment philosophy of her ARK funds is to identify large-scale investment opportunities in the public markets resulting from technological innovations centered around DNA sequencing, robotics, artificial intelligence, energy storage, and blockchain technology.

This year, the performance of ARK funds have mostly lagged the broader market, but recently, Cathie Wood added more shares of three innovative companies that are at the forefront of disrupting their respective industries: Etsy Inc. (ETSY), Okta Inc. (OKTA) and Robinhood (HOOD).

In this article, I will analyze these three companies and identify if they are suitable for retail investors.

Etsy Inc. (ETSY)

ETSY operates two-sided online marketplaces that connect people with buyers and sellers around the world. Its primary marketplace, Etsy.com, is the global destination for creative goods. The company offers a range of tools and services that address key business needs, allowing Etsy sellers to pay for placement of their listings in search results

Since the beginning of the year, ETSY has advanced robustly, up 34.7%, outperforming the Amplify Online Retail ETF (IBUY), which lost 2.4% year-to-date.

Chart from Stock News

ETSY has strong financials with the company’s top line growing consistently over the past years and is expected to continue to grow in the 20% range in the next two years, topping a net sales figure of $3.36b in 2023, compared to $2.2b in 2021. ETSY’s bottom line has been hit hard by the pandemic after net income dipped 63.6% in 2020 to $349m. Nevertheless, the company’s bottom line is now recovering and it is expected to grow by 19.1% in 2022 to $524m and by 38.5% in 2023 to $726m.

On the other hand, ETSY’s financial structure has been weighed down by debt this year. ETSY reported a net debt position of $354m this year compared to a net cash position of $553 the previous year. Yet, ETSY is profitable and with its double-digit net margin of nearly 20%, analysts expect the company’s net cash position to reach $293m in 2022 and $1.21b in 2023.

In terms of market capitalization, the company trades at high valuation metrics, with a 2022e EV/EBITDA of 40.7x and a massive 2022e P/E ratio of 71.5x.

Okta Inc. (OKTA)

Okta, Inc. is specialized in the development and marketing of corporate identity management software. The company operates the Okta Identity Cloud platform that enables authentication and data security for IT organizations and web developers.

Investors in OKTA have been disappointed this year, as the stock performance of the data security company declined slightly, down…


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