Cathie Wood, founder and CEO of Ark Invest, rose to fame when her suite of ETFs (exchanged traded funds) delivered stellar returns in 2020. Wood’s flagship fund, the ARK Innovation ETF (ARKK), which gained 153% in 2020, lost steam this year and is down over 56% year-to-date. Many of ARKK’s holdings declined following the reopening of the economy, and amid rising interest rates. That said, Wood continues to believe in the long-term growth prospects of ARKK’s holdings.
Wood believes in investing in companies with disruptive innovation, including artificial intelligence, robotics, energy storage, DNA sequencing, and, blockchain technology. In an interview with CNBC, Wood acknowledged that inflation has been more sustained than she anticipated. She also pointed to supply chain bottlenecks and the Russia-Ukraine war. Despite these headwinds, Wood stated that clients are mostly sticking with her, and new money is flowing in as investors seek diversification in a market downturn.
With that in mind, we used the TipRanks Stock Comparison Tool to place three of the top holdings of ARKK ETF – Zoom, Tesla, and Roku, against each other to pick the stock with a higher upside potential.
Zoom Video Communications (NASDAQ: ZM)
Zoom was one of the pandemic darlings, thanks to its widely accepted video conferencing tool that gained from stay-at-home mandates. Zoom’s growth rates moderated following the reopening of the economy. That said, it still posted better-than-anticipated earnings for Q1 FY23 (ended April 30, 2022).
What’s more, Zoom’s Q2 and full-year earnings guidance came ahead of analysts’ expectations, reflecting its efforts to improve profitability amid inflation and tough comparisons. Zoom is optimistic about the path ahead as it continues to enhance its platform with new features and innovative solutions.
Last month, Wood’s ARK Invest stated in a note that it expects Zoom stock to reach $1,500 per share in 2026. The firm’s bull- and bear-case price targets are $2,000 and $700, respectively. The firm’s investment thesis is based on the growing adoption of a hybrid work environment.
Recently, Daiwa analyst Stephen Bersey double upgraded Zoom to a Buy from Sell and boosted the price target to $121 from $107. Bersey feels that the pullback in the stock offers an attractive entry point. The analyst noted that growth expectations “seem more realistic,” now. Also, Zoom’s “solid execution” in Q1 gives Bersey a “positive incremental conviction” that the core business demand is stabilizing.
Overall, the Street is cautiously optimistic on Zoom, with a Moderate Buy consensus rating based on eight Buys and 11 Holds. The average Zoom price target of $128 implies 15.35% upside potential from current levels.
Tesla (NASDAQ: TSLA)
Leading electric vehicle maker Tesla recently reported second-quarter deliveries of 254,695, which fell short of analysts’ expectations of 256,520. It produced 258,580 vehicles.
Tesla, like other EV makers, has been impacted by supply chain bottlenecks, chip shortage, and factory shutdowns amid lockdowns in China. Tesla’s Q2 deliveries grew 26.5% year-over-year, but were down nearly 18% from the first quarter.
Aside from production issues, Tesla and other EV makers are also struggling with high inflation. The company stated that June was the highest vehicle production month in it’s history, perhaps indicating that things might improve in the second half.
Meanwhile, Goldman Sachs analyst Mark Delaney believes that Tesla’s direct current fast charging network is a “key asset of the company,” and contributes to its robust market share. While this network has historically been accessible only to Tesla owners, the company has discussed plans to open it up to all EV drivers over time.
Delaney believes that opening up the network could represent a “sizable revenue opportunity with strong incremental margins by improving station utilization.” The analyst estimates that the incremental revenue opportunity could be $1 billion to $3 billion in a few years, with incremental EPS of up to $0.75. That said, Delaney also stated this move could be a “key risk” as it could limit the reasons to buy a Tesla versus another EV.
Overall, Delaney has a Buy rating on Tesla stock, with a price target of $1,000.
Tesla scores a Moderate Buy consensus rating that breaks down into 16 Buys, eight Holds, and six Sells. At $899.86, the average Tesla price target implies 31.98% upside potential from current levels.
Roku (NASDAQ: ROKU)
Roku sells a wide range of hardware products, including streaming players and smart TVs, which provide a platform for streaming content. Aside from the revenue from the sale of streaming players, a substantial portion of Roku’s revenue comes from digital ad sales and related services, as well as content distribution services.
While supply chain issues have hurt TV and streaming device sales and pandemic tailwinds have also faded, Roku seems well-positioned to benefit from the shift from linear to connected TVs.
Last month, Walmart and Roku announced a collaboration, under which Walmart will be the exclusive retailer to enable viewers on Roku’s platform to purchase featured products.
Truist analyst Matthew Thornton believes that the benefit to Roku under this deal should be “high demand for this high eCPM based ad unit.” Further, he feels that the deal could open up the program to other commerce platforms, including retailers, services, and travel, while generating higher interest in deals with Roku from advertisers.
Thornton reiterated a Buy rating on Roku stock with a price target of $150.
On TipRanks, Roku has a Moderate Buy consensus rating, with 16 Buys, five Holds, and one Sell. The average Roku price target of $153.09 implies 82.45% upside potential from current levels.
Shares of Zoom, Tesla, and Roku are down nearly 40%, 35.5%, and 63.2%, year-to-date, respectively. That said, these stocks continue to be the top holdings of ARKK ETF. Meanwhile, analysts are cautiously optimistic on these stocks due to persistent macro headwinds.
Currently, analysts see a higher upside potential in Roku stock, and expect the company to benefit from the secular shift from legacy pay-TV to connected TVs.
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