Cathie Wood has had a bad year. Ark Invest co-founder and CEO has watched many of her favorite stocks fall in a rising market. Ark Invest's largest ETF is down 4% in 2024, despite most growth investors' good starts. Her best investments are doing worst.
Wood added to Tesla (NASDAQ: TSLA), Roku (NASDAQ: ROKU), and Roblox (NYSE: RBLX) on Monday, despite their 20%–31% losses this year. Let's examine the out-of-favor equities she's buying.
1. Tesla: 31% lower Tesla shares doubled in 2023. This year was different. The leading electric vehicle (EV) producer fell in January after reporting disappointing fourth-quarter earnings. Adjusted earnings fell 40% to $0.71 a share while revenue grew 3% to $25.2 billion. Analysts expected more on both fronts.
The company's sales growth and margins should slow and collapse. Tesla spent most of last year reducing EV pricing to boost demand for its increased output. Cutting costs so the base Model X qualifies for the $7,500 federal tax credit has helped sell automobiles.
Tesla sold vehicles well: fourth-quarter deliveries rose 20%. The disappointing 3% top line gain was due to the steep year-over-year fall in average selling prices and purchasers' continued move to Model 3s and Model Ys. With price cuts surpassing cost savings, the company's bottom line was bound to suffer.
The stock rebounded with the market in February, but it fell again this month on concerns that the current quarter may fail. Tesla is providing hefty incentives to buyers of its existing inventory if they take delivery of their new EVs before March, so watchers expect disappointing first-quarter results.
On Tuesday, Bernstein analyst Toni Sacconaghi lowered his Tesla price objective from $150 to $120 and cut his production expectations for the quarter and 2024. He also estimated 2025 earnings of $2.22 a share, below the analysts' consensus of $3.67 and below Tesla's 2022 and 2023 earnings.
Wood doesn't mind buying a stock down roughly a third this year. Tesla has recovered from significant sell-offs. Ark Invest's second-largest holding is Tesla.
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