Cathie Wood, the founder of Ark Investment Management, is famed for her bold bets on disruptive, high-growth companies. Her innovative stock picks, spanning tech, genomics, artificial intelligence (AI), and fintech, have made her one of the biggest names in capital management. Investors eagerly follow her buys and sells, waiting to see which disruptors will get her seal of approval.
Coinbase Global, Inc. (COIN) and Robinhood Markets, Inc. (HOOD), key players in the future of finance and tech, feature prominently in Ark Invest funds, such as the ARK Innovation ETF (ARKK), the ARK Fintech Innovation ETF (ARKF), and the ARK Next Generation Internet ETF (ARKW). Despite some selling this year, Coinbase, the cryptocurrency exchange giant, still holds a weighting of 6.79% in Wood's portfolio, while Robinhood, the popular commission-free trading platform, accounts for 3.74%.
With Coinbase and Robinhood both enjoying outsized YTD gains and recent upgrades from Bank of America (BAC), these two Cathie Wood picks are clear standouts in the Ark portfolio this year.
Let's take a closer look at these stocks.
Cathie Wood Stock #1: Coinbase Global
Founded in 2012 and based in Wilmington, Delaware, Coinbase Global, Inc. (COIN) has quickly become a powerhouse in the cryptocurrency world. With a market cap of $55.4 billion, it's a go-to platform for trading digital assets like Bitcoin (BTCUSD) and Ethereum (ETHUSD). As a leader in the crypto space, Coinbase continues to innovate, making crypto accessible to millions - while navigating occasional regulatory roadblocks, too.
Across all Ark ETFs combined, 3.57 million shares of Coinbase are held, making it the No. 2 by weight.
Shares of Coinbase have gained 275% over the past 52 weeks, significantly outperforming the broader S&P 500 Index’s ($SPX) 26.2% returns. COIN has gained 31.8% on a YTD basis, again outshining the SPX’s 10.9% return over the same time frame.
In terms of valuation, Coinbase stock trades at 39.79 times forward earnings and 16.40 times sales.
Coinbase thrives primarily from transaction fees and booms when crypto trading is active. Despite revenue dips in 2022 and 2023, metrics rebounded this year as Bitcoin's price hit new highs amid spot ETF approvals and April’s “halving” event. The bull market, coupled with high interest rates, reignited investor interest in cryptocurrencies, boosting Coinbase's trading volume and revenue.
Coinbase dropped its Q1 earnings results on May 2, blowing past expectations. Revenue soared 112% annually to $1.6 billion, smashing analyst predictions by 19.7%. Transaction revenue nearly tripled, reaching $1.08 billion. The company flipped from a $0.34 loss per share in the prior year quarter to EPS of $4.40, beating forecasts by a staggering 244.8%.
Coinbase expanded its market share in the U.S. spot and derivatives markets, boosted USDC's market cap, and saw strong adoption of Coinbase One, its subscription-based program. Its international growth soared, and Base, its Layer 2 solution, is enhancing crypto utility by improving ecosystem infrastructure and enabling onchain innovation. In April, Coinbase achieved over $300 million in total transaction revenue.
The company projects Q2 subscription and services revenue to range between $525 million and $600 million, assuming stable crypto asset prices, while technology & development and general & administrative expenses are forecasted between $660 million and $710 million, driven by higher trading volumes. Analysts tracking Coinbase predict its EPS to grow to $5.01 in fiscal 2024, up 511% annually.
Last week, BofA Securities upgraded Coinbase Global to “Neutral” from “Underperform” and nearly doubled its price target from $110 to $217, citing improved earnings potential and retail re-engagement with crypto amid favorable market conditions. They also highlighted Coinbase's disciplined cost management post-2022 cuts, although ongoing regulatory concerns and the company’s reliance on transaction revenue remain points of concern.
Coinbase has a consensus “Moderate Buy” rating overall, compared to a "Hold" rating three months ago. Of the 22 analysts covering the stock, eight advise a “Strong Buy,” one suggests a “Moderate Buy,” 11 give a “Hold,” and the remaining two have a “Strong Sell” rating.
The mean price target of $231.05 is nearly flat with COIN's current price levels. However, the Street-high target price of $325 for Coinbase implies that the stock could rally as much as 41.2%.
Cathie Wood Stock #2: Robinhood Markets
While Coinbase is the top crypto trading platform, Robinhood Markets, Inc. (HOOD), incorporated in 2013, is a top discount trading platform. After originally disrupting the industry with commission-free trading, Robinhood has since diversified its product range, solidifying its position as a fintech trailblazer.
With a market cap of $18.3 billion, Robinhood aims to democratize finance, making investing accessible to everyone through its sleek, user-friendly app. It remains a favorite among retail investors, offering various trading options, from stocks to cryptocurrencies.
Ark Investment holds 21.27 million shares of Robinhood, making it the No. 6 by weight.
Shares of Robinhood rose 125.6% over the past 52 weeks and 55% on a YTD basis, outperforming the broader SPX's returns over the same time frame.
In terms of valuation, Robinhood stock trades at 33.93 times forward earnings and 9.47 times sales.
On May 8, the fintech giant reported stellar Q1 earnings results, driven by strong crypto trading volumes and higher short-term rates that boosted net interest revenue. Revenue soared 40% year-over-year to $818 million, surpassing estimates by 10.9%. Impressively, the company turned the year-ago quarter's $0.57 loss per share into a solid $0.18 EPS, beating forecasts by a remarkable 260%.
Robinhood has evolved from a fee-free brokerage service to a full-fledged financial services provider, a transformation that helped to boost its monthly active users by 16% in Q1. Assets under custody surged 65% annually to $129.6 billion, driven by higher equity and crypto valuations. Plus, with 1.7 million Robinhood Gold members, new products like the Gold Card, and a 1% deposit boost feature, Robinhood aims for sustainable growth.
Analysts tracking Robinhood predict its EPS to grow to $0.53 in fiscal 2024, up 186.9% annually, and then grow another 17% to $0.62 in fiscal 2025.
On May 17, BofA Securities double upgraded the trading platform to "Buy" from "Underperform," and raised the stock’s price target to $24 from $14. Analyst Craig Siegenthaler cited increasing retail investor engagement and accelerating organic growth, and also noted the company's attractive valuation after earnings.
Robinhood has a consensus “Hold” rating overall. Of the 16 analysts covering the stock, five advise a “Strong Buy,” eight suggest a “Hold,” and the remaining three give a “Strong Sell” rating.
Although Robinhood stock trades about even with the mean price target of $19.70, the Street-high target price of $30, reiterated by JMP Securities on May 16, implies that the stock could rally as much as 52.6%.
On the date of publication, Sristi Suman Jayaswal 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.
