Cathie Wood, the founder of Ark Invest, is known for her bold bets and focus on disruptive technologies. Wood’s bold stock picks have made her a prominent figure among investors, who closely follow her decisions. With a strong belief in the potential of disruptive innovation, Wood’s investment philosophy has positioned her as a leading voice in the world of capital management.
Two leading fintech giants, Coinbase Global, Inc. (COIN) and Robinhood Markets, Inc. (HOOD), are major holdings in Cathie Wood’s investment portfolio, prominently featured in both her flagship ARK Innovation ETF (ARKK), along with the ARK Fintech Innovation ETF (ARKF) and the ARK Next Generation Internet ETF (ARKW), underscoring Wood’s strong faith in their potential to drive future financial and technological advancements.
Recently, Barclays upgraded both of these Cathie Wood-backed stocks to "Equal Weight," signaling a major shift in the firm’s outlook. Analyst Benjamin Budish pointed out that as both companies’ business models mature, the risks fade, and valuations “look more sensible.” With significant strides in product expansion and financial efficiency, both of these fintech names could be ideal investment candidates for crypto-focused investors now.
Cathie Wood Stock #1: Coinbase Global
Founded in 2012, Delaware-based Coinbase Global, Inc. (COIN) is at the forefront of the cryptocurrency revolution, providing essential financial infrastructure and technology both in the U.S. and globally. As a primary gateway to the crypto economy, Coinbase offers consumers a trusted financial account, and provides institutions a robust marketplace with ample liquidity for trading crypto assets.
Beyond this, the company empowers developers with technology and services to build innovative crypto products and securely accept digital payments. Valued at $38.9 billion by market cap, shares of this crypto exchange giant are up a notable 95% over the past year, easily overshadowing the broader S&P 500 Index’s ($SPX) return of around 23.8% during this period.
In terms of valuation, COIN stock is priced at 34.43 times forward earnings and 11.78 times sales, reflecting expectations for above-average returns.
The crypto exchange company disclosed its Q2 earnings results on Aug. 1, with adjusted EBITDA hitting $596 million, marking the sixth consecutive quarter of positive adjusted EBITDA. Total revenue for the quarter amounted to approximately $1.5 billion, marking a solid 104.8% year-over-year jump and blowing past estimates by almost 6.2%.
Revenue from subscription and services was $599 million, up 78.6% from the year-ago quarter. While earnings of $0.14 per share fell short of forecasts, it marked a dramatic turnaround from last year’s $0.42 loss per share.
For Q3, management anticipates revenue from subscription and services to range between $530 million and $600 million. Transaction expenses are anticipated to be in the mid-teens percentage of net revenue.
Additionally, sales and marketing expenses are forecast to increase to $160 million-$210 million, driven by ramped-up digital marketing efforts. For the full fiscal year, analysts tracking Coinbase project the company’s bottom line to hit $4.28 per share in 2024, representing a staggering 422% annual jump.
Coinbase also cited progress toward greater regulatory clarity during Q2, as the company’s “Stand With Crypto” campaign rallied over 1.3 million advocates to help elect pro-crypto candidates.
In fact, a key driver behind Barclays' optimism toward Coinbase is the improving regulatory environment surrounding cryptocurrencies, with the firm calling out the approval of Bitcoin (BTCUSD) and Ethereum (ETHUSD) spot ETFs as indications of mainstream adoption.
Overall, Wall Street is optimistic, with a consensus “Moderate Buy” rating for COIN stock. Of the 21 analysts offering recommendations, eight advise a “Strong Buy,” one advocates “Moderate Buy,” 11 suggest “Hold,” and one recommends a “Strong Sell.”
The average analyst price target of $248.58 indicates an expected 58.2% potential upside from the current price levels.
Cathie Wood Stock #2: Robinhood Markets
California-based Robinhood Markets, Inc. (HOOD) disrupted the online brokerage business at its inception in 2013, challenging much larger legacy rivals with its low- and zero-fee model. Robinhood allows users to invest in stocks, ETFs, options, gold, and cryptocurrencies with features like fractional trading, margin investing, and instant withdrawals, and also offers premium services like Robinhood Gold and retirement investing.
With a market cap of around $17.3 billion, shares of this trading platform have outperformed the broader SPX over the past year, with gains of roughly 90.4%. In 2024 alone, HOOD stock is up 62%, dwarfing the SPX’s 16.4% gain on a YTD basis.
From a valuation standpoint, HOOD stock is trading at 24.86 times forward earnings and 8.98 times sales, roughly in line with electronic exchange operator Nasdaq (NDAQ).
Following HOOD’s Q2 earnings results, which shattered Wall Street’s expectations, the stock jumped more than 3% on Aug. 8. Total net revenues of $682 million climbed 40% year over year, and topped estimates by 6.1%. Q2 earnings of $0.21 per share improved considerably from $0.03 in the year-ago quarter, and comfortably surpassed Wall Street’s forecast of $0.15 per share.
The brokerage platform struck a deal in June to acquire Bitstamp, a leading crypto exchange with over 50 international licenses, serving customers across the EU, UK, U.S., and Asia.
More recently, Robinhood in July announced the acquisition of Pluto Capital, an artificial intelligence (AI)-powered investment research platform. These strategic moves position Robinhood for a stronger presence in both the crypto and AI-driven investment sectors.
For fiscal 2024, the company’s expense plan focuses on growth investments in new products, features, and international expansion, while also aiming to enhance efficiency in existing operations. The outlook for total operating expenses for the entire year ranges between $1.85 billion and $1.95 billion.
Analysts tracking Robinhood expect the company to swing to a profit of $0.76 per share in fiscal 2024, reversing last year’s loss of $0.61.
As for Barclays, analyst Budish predicts that HOOD will see “likely future upside... from new products (e.g., futures, credit card), geographic expansion (e.g., UK brokerage, EU crypto), and potential new channels (e.g., institutional through the pending Bitstamp acquisition).”
HOOD stock has a consensus “Moderate Buy” rating overall, up from an average “Hold” opinion two months ago. Of the 17 analysts covering the stock, eight suggest a “Strong Buy,” eight recommend a “Hold,” and one has a “Strong Sell” rating.
The average analyst price target of $22.28 indicates a potential upside of 10.6% from the current price levels. The Street-high price target of $32 represents a premium of 55%.
On the date of publication, Anushka Mukherji did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
