Cathie Wood Invests in Undervalued Tech Stock
Cathie Wood, the founder and CEO of Ark Invest, made a significant investment in Netflix last week, acquiring over $17 million in shares. This move comes as a contrast to the widespread panic selling of Netflix among investors. Despite typically focusing on growth stocks, Wood took advantage of the downturn in Netflix’s stock price.
Cathie Wood’s Investment Strategy with Netflix
Wood’s Ark Next Generation Internet ETF (ARKW) added approximately $17.2 million in Netflix shares. This ETF targets companies expected to thrive from disruptive technologies such as cloud computing, mobile solutions, and big data.
Market Performance and Key Metrics
- Current Price: $1,097.06
- Market Capitalization: $465 billion
- Day’s Range: $1,085.21 – $1,103.64
- 52-Week Range: $779.94 – $1,341.15
- Volume: 217,000 shares
- Average Volume: 3.5 million shares
- Gross Margin: 48.02%
- Dividend Yield: N/A
Despite a recent 10% drop after the company reported disappointing third-quarter results, Netflix remains a key player in the streaming industry. The ETF’s share price has notably doubled over the past year, with a year-to-date increase of 65%.
Financial Results and Their Impact
Netflix’s poor performance can be attributed to missing earnings expectations. Analysts forecasted earnings of $6.97 per share; however, the company reported only $5.87 per share. This also marked a decrease compared to previous quarters. Additionally, the operating margin fell short of expectations at 28%, compared to the anticipated 31%.
In terms of future forecasts, Netflix expects a revenue growth of 16.7% for the fourth quarter, slowing down from the 17.2% achieved in the third quarter. Overall, the stock has seen a decline of nearly 18% since its peak on June 30, 2023.
Long-term Outlook on Netflix
Despite these setbacks, Cathie Wood seems to takes a long-term view. She noted that the earnings miss was largely due to a one-time $619 million charge related to a tax dispute in Brazil, which skews a healthier outlook for the company’s financials.
Moreover, Netflix’s introduction of an ad-supported subscription tier in 2022 is showing promise, with ad revenue projected to double in 2025. Co-CEO Greg Peters highlighted that the pace of ad deals with businesses is increasing, which could provide new revenue streams for the company.
In conclusion, Cathie Wood’s investment in Netflix amid panic selling reflects her belief in the company’s long-term potential. Ark Invest continues to adopt a strategy geared towards innovation and disruption, which could ultimately benefit from Netflix’s evolving business model.
