Cathie Wood Just Sold Roku — and Bought This Artificial Intelligence (AI) and Bitcoin Growth Stock

Cathie Wood Just Sold Roku — and Bought This Artificial Intelligence (AI) and Bitcoin Growth Stock

Ark Invest, led by CEO Cathie Wood, has made some interesting moves in the wake of its recent earnings reports. While the company chose to reduce its holdings in the field of specialized broadcast technologies year (NASDAQ:ROKU) On Monday, its holdings increased in roadblock (NYSE: SCO).

It is worth noting that both Roku and Block achieved significant successes and encouraging trends with their recent releases in the third quarter. Why would Wood sell one and buy the other?

Wood is selling Roku after an encouraging third-quarter report

Roku reported third-quarter results on November 1 and posted overall results and guidance that beat market expectations despite posting earnings that fell short of Wall Street’s target. The streaming company reported a loss per share of $2.32 on sales of $912 million, while average analyst estimates indicated a loss per share of $1.93 on revenue of $855.66 million.

Although the loss in this period was much larger than expected, sales exceeded Wall Street expectations. Roku saw the number of its active accounts increase 16% year-over-year to $65.4 million, and total streaming hours on the platform jumped 22% to 21.9 billion. Strong engagement growth offset a 7% decline in average revenue per user and allowed the company to increase sales by nearly 20% compared to the same period a year earlier.

It appears that the strong momentum will continue in the near term. For the current quarter, Roku management is guiding for sales of $955 million — a target that came in well ahead of the previous call for an average analyst estimate for sales of about $951 million. The company also expects gross profit of approximately $405 million and non-GAAP (adjusted) earnings before interest, taxes, depreciation and amortization (EBITDA) of $10 million.

Overall, it was a great quarterly update for streamers. The chart below tracks Roku’s stock performance following its latest earnings report.

ROKU History by YCharts.

As the chart above shows, Roku stock rose nearly 40% in the wake of the third-quarter report. In exchange, Ark elected to sell 171,268 shares of its stock Ark Innovation ETF.

Should investors sell Roku and buy Block?

The day after Roku’s report, Block provided its own Q3 beats. The company reported a loss per share of $0.05 on revenue of $5.62 billion, flattening average analyst estimates for a loss per share of $0.11 per share on revenue of $5.43 billion.

Block also laid out plans for significant growth initiatives in the AI ​​space while also emphasizing that it will take a very cost-conscious approach to building the business overall.

By 2026, the company expects to post mid-life total earnings growth and an adjusted operating income margin of 20% — a forecast that would take the business past the sustainability threshold valued by some analysts and investors.

As the chart below shows, the market responded positively to the report.

SQ chart

SQ data by YCharts.

While Block saw big gains in the wake of its earnings report, they weren’t as pronounced as Roku’s. Following Block’s third-quarter report, Ark purchased 70,022 shares of the company Ark Innovation ETF. The company also purchased shares for its own benefit ARK is the next generation of Internet ETFs And ARK Fintech Innovation ETF.

Wood and the investment teams at Ark generally take an active approach to portfolio management across their ETFs. While Ark has long-term investment strategies for many of the stocks it owns, the company occasionally sells its holdings in its preferred stocks in the wake of significant gains.

This frees up money to be available for other investments and also ensures that individual stocks do not represent too large a position size in the fund. After Roku’s massive gains, Wood’s appears to have chosen to reweight the fund to reduce exposure to streaming stocks.

In addition to initiatives in AI-enabled fintech services, Block Stock is also a Bitcoin Playing – Wood remains very bullish on the market-leading cryptocurrency. The company owns the cryptocurrency token, allows it to be purchased and held through the Cash App service, and has other initiatives aimed at promoting the future of digital assets.

But it has to be said that Wood also remains bullish on Roku. The streaming specialist remains the largest single holding in the ARK Innovation ETF – accounting for about 9.4% of the fund’s total weight. It’s also the second-largest holding in the ARK Next Generation Internet ETF and the 11th-largest holding in the ARK Fintech Innovation ETF.

While Roku stock is up roughly 105% year to date, Block is actually still down 19% for the year in trading. Wood’s move suggests she currently sees further upside in the fintech company’s shares, but there’s no indication she’s abandoning Roku.

Investors who own both stocks can decide if they want to follow Wood’s reweighting strategy, but it would be a mistake to think she’s abandoned Roku.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Block, and Roku. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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