When a stock falls out of favor with the general investment community, revered investor Cathie Wood tends to take a closer look. If the company is an innovator with strong long-term potential, she’s not one to shy away from seizing the opportunity. This strategy has been a key driver behind the success of the Chief Executive Officer of Ark Invest, enabling her to acquire top-tier assets at discount prices.
Over the past year, Wood’s flagship Ark Innovation fund surged by an impressive 67%, outperforming the S&P 500. Yet, this may very well be just the tip of the iceberg. Wood’s investment strategy rests on retaining her premier selections for the extended haul to capitalize on maximum profits. And in the previous week, she engaged in another round of bargain-hunting, securing three stocks that possess the potential to skyrocket.
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Tesla: A Steady Course in Choppy Waters
Veteran Tesla enthusiast Cathie Wood hasn’t wavered in her optimism towards Tesla (NASDAQ: TSLA), with the electric vehicle (EV) titan occupying a prominent position in Ark Innovation. Wood doesn’t hesitate to trim Tesla shares when needed, but during downturns, she swiftly replenishes her holdings. This is underpinned by Wood’s belief, shared by her team, that Tesla’s stock could ascend to $2,000 by 2027, translating to a staggering 1,100% surge from current levels.
Tesla remains committed to advancing autonomous driving technology and is eyeing the launch of a fleet of robotaxis. CEO Elon Musk has even articulated a vision where Tesla owners could leverage their vehicles as taxis, creating a revenue stream for both themselves and the EV behemoth.
While sky-high success isn’t guaranteed, a stock leap of such magnitude might not materialize. However, Tesla’s unwavering brand dominance in the EV sphere, ongoing innovation exemplified by the Cybertruck launch, and expansion into other sectors like energy production and storage could drastically elevate the stock from its current position.
Backed by a cash reserve exceeding $29 billion, Tesla is well-positioned to fuel its growth ambitions, making it an appealing buy amidst market dips.
Moderna: Pioneering Beyond the Pandemic
Famed for its coronavirus vaccine, Moderna (NASDAQ: MRNA) has garnered global acclaim and substantial earnings. As the world transitions towards a post-pandemic phase, the diminishing demand for its flagship product has raised concerns among investors regarding Moderna’s future growth trajectory.
By including Moderna shares in Ark Innovation last week, Wood’s optimism may pivot on the company’s late-stage pipeline and the imminent innovations on the horizon. With aspirations to introduce up to 15 new products over the next five years, Moderna, including a potential regulatory approval for its investigational respiratory syncytial virus (RSV) vaccine this spring, appears poised for an evolution.
Anticipated growth catalysts for Moderna are likely to emerge from its respiratory vaccine lineup and potential offerings in other therapeutic domains such as oncology. This diversification ensures that Moderna presents a lower risk profile today compared to a couple of years back when these programs were in their infancy.
With revenue projections of up to $15 billion from its respiratory arm in 2027, complemented by income from new products slated for a few years later, Wood’s acquisition of Moderna shares at around 8 times forward earnings estimates appears prudent.
Toast: Warming Up Despite the Frost
Toast (NYSE: TOST), a software-as-a-service provider catering to the restaurant industry with an all-encompassing platform for operational management, has witnessed a notable uptrend in its stock price this year, with a 28% climb. Nonetheless, the shares persist at over a 60% discount from their initial public offering in 2021. Hence, Wood’s decision to augment Ark Fintech Innovation with Toast stock could be a strategic bargain move.
While recent stock performance echoes positive momentum fueled by expanding clientele and sturdy earnings, Toast remains cautious about challenges ahead. In the latest quarter, Toast boasted a 35% surge in its annualized recurring run rate, surpassing $1.2 billion, and predicted a GAAP operating income profit by the first half of 2025.
The increasing user base, with over 6,500 additional locations embracing its services in the last quarter, totaling 106,000 establishments by the end of the preceding year speaks volumes about Toast’s progress. However, lingering industry challenges like escalating costs could sway some restaurant proprietors towards more cost-effective alternatives, shaping Toast as a venture suitable only for risk-tolerant investors.
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*Stock Advisor returns as of March 11, 2024
Adria Cimino has holdings in Tesla. The Motley Fool has stakes in and endorses Tesla and Toast. The Motley Fool recommends Moderna. The Motley Fool adheres to a disclosure policy.
The viewpoints and perspectives expressed in this article belong to the author and may not necessarily align with those of Nasdaq, Inc.
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