This past year has been extremely challenging for Cathie Wood’s equity funds. The tech-heavy ARK Innovation ETF (ARKK) has been foundering after hitting its peak in February 2021, owing to concerns surrounding the Fed’s hawkish stance, which negatively impacts growth stocks. Furthermore, the escalating Russia-Ukraine war has led to a sharp spike in commodity prices and U.S. Treasury yields, adding to inflationary pressures. These macroeconomic factors have weighed more broadly on ARK’s equity fund.
During the first quarter of 2022, ARKK was the worst-performing U.S. equity fund, and incurring severe losses in the quarter. A sharp selloff in tech stocks has dragged down the leading ARKK fund. Cathie Wood’s top holdings have been retreating sharply due to the selloff. Yesterday, the fund’s third-biggest holding, Teladoc, tumbled more than 46% in price following a poor earnings report. Investors’ bearish sentiment is evident in ARKK’s 61% decline over the past year.
Given their history of losses, deteriorating fundamentals, and bleak growth prospects, we think it could be wise to avoid Cathie Wood’s stocks Invitae Corporation (NVTA), Teladoc Health, Inc. (TDOC), Zoom Video Communications, Inc. (ZM), and Roku, Inc. (ROKU).
Invitae Corporation (NVTA)
NVTA is a medical genetics company that improves healthcare in the U.S., Canada, and internationally by integrating genetic information into mainstream medicine. The San Francisco company provides digital health solutions and genetic tests in different clinical areas, including hereditary cancer, neurology, cardiology, metabolic conditions, oncology, and rare diseases. It serves patients, healthcare providers, and biopharma companies. The stock has 10.27% weighing in ARK’.
In its fiscal 2021 fourth quarter, ended Dec. 31, 2021, NVTA's research and development expenses increased 82.6% year-over-year to $131.76 million, while its selling and marketing expenses grew 27.3% year-over-year to $62.21 million. Its loss from operations for the fourth quarter was valued at $214.57 million. The company's net loss and net loss per share amounted to $205.12 million and $0.90, respectively.
The negative $0.83 consensus EPS estimate for its fiscal year 2022 first quarter, ended March 31, 2022, represents a 47.8% year-over-year decline from the same period in 2021. The stock has declined 66.5% in price year-to-date and 85.8% over the past year. It closed yesterday's trading session at $5.22.
NVTA's POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
NVTA has an F grade for Sentiment. It has a D grade for Quality, Stability, and Momentum. Within the D-rated Medical - Diagnostics/Research industry, it is ranked #47 of 49 stocks.
To see NVTA's POWR Ratings for Growth and Value, click here.
Click here to checkout our Healthcare Sector Report for 2022
Teladoc Health, Inc. (TDOC)
TDOC offers virtual healthcare services in the U.S. and internationally. The Dallas, Tex., company provides a portfolio of services and solutions covering episodic, chronic, and medical conditions. TDOC also offers programs and services, including specialty care telehealth solutions, chronic condition management, mental health solutions, and platform and program services. It offers its products and services under the Teledoc, Livongo, and BetterHelp brands. TDOC has an 11.42% weighting in ARK.
TDOC’s total expenses increased 1,243.9% year-over-year to $7.23 billion in its fiscal 2022 first quarter ended March 31, 2022. The company's loss from operations grew 7,776.2% year-over-year to $6.67 billion. Its net loss before taxes rose 5,826.8% year-over-year to $6.67 billion. Its net loss and net loss per share came in at $6.67 billion and $41.58, respectively, registering an increase of 3,243.1% and 3,074% from the prior-year period.
Analysts expect TDOC's revenue to amount to $598.58 million for its fiscal year 2022 second quarter, ending June 30, 2022, representing a 19% decline from the prior-year period. The Street expects the company's loss per share for the fourth quarter, ending Dec. 31, 2022, to come in at $0.46, representing a 619.2% increase year-over-year. It is no surprise that the company has missed the consensus EPS estimates in three of the trailing four quarters.
Shares of TDOC have plunged 77.5% in price over the past six months and 82% over the past year and closed yesterday's trading session at $33.51.
TDOC's POWR Ratings reflect its poor prospects. The company has an overall D rating, which translates to Sell in our proprietary rating system.
The stock has an F grade for Sentiment and a D grade for Value, Stability, and Momentum. It is ranked #75 of 83 stocks in the Medical - Services industry.
To see additional POWR Ratings (Growth and Quality) for TDOC, click here.
Click here to checkout our Healthcare Sector Report for 2022
Zoom Video Communications, Inc. (ZM)
ZM in San Diego, Calif., offers a unified communications platform in the Americas, the Asia-Pacific, Europe, the Middle East, and Africa. The company offers a wide range of platforms, including Zoom Meetings, Zoom Chat, Zoom Rooms, Zoom Hardware-as-a-Service, OnZoom, and Zoom webinars. In addition, it provides Zoom Developer Platform and Zoom App Marketplace. It serves individuals and industries such as healthcare, government, manufacturing, entertainment, education, and software. The stock has a 3.25% weighting in ARK’s portfolio.
Last November, Brundidge & Stanger P.C., a leading recognized Intellectual Property law firm, announced multi-patent infringement litigation against ZM for alleged infringement of its client Cyph, Inc.’s patents and inventions. Cyph filed a lawsuit valued at hundreds of millions of dollars on Nov. 9, 2021, against ZM for intellectual property (IP) infringement and using Cyph’s proprietary technology without paying for it.
In its fiscal year 2022 fourth quarter, ended Jan. 31, 2022, ZM's total operating expenses increased 56.6% year-over-year to $562.21 million. Its income from operations declined marginally from the prior-year period to $251.82 million. The company's cash and cash equivalents decreased 52.6% year-over-year to $1.06 billion for its fiscal 2022 (ended January 31). In addition, its cash outflow from investing activities amounted to $491.99 million for fiscal 2022.
The $0.88 consensus EPS estimate for its fiscal 2023 first quarter, ending April 30, 2023, represents a 33.7% year-over-year decline from its year-ago value. The stock has decreased 44.3% in price year-to-date and 69.1% over the past year. It closed yesterday's trading session at $102.56.
ZM's POWR Ratings reflect this bleak outlook. It has a grade of D for Stability and Growth. It is ranked #35 of 81 stocks in the D-rated Technology - Services industry.
Click here to see ZM's POWR Rating for Value, Sentiment, Quality, and Momentum.
Roku, Inc. (ROKU)
San Jose, Calif.-based ROKU operates a TV streaming platform. The company operates through two segments: Platform; and Player. ROKU’s platform offers access to various movies and TV shows. It has more than 61 million active accounts. It offers digital and video advertising, content distribution, subscription, and billing services. In addition, ROKU provides streaming players and audio products under the Roku brand name. It has 6.83% weighting in ARK’s portfolio.
The slowdown in the fourth quarter was largely attributed to global supply chain disruptions that impacted the U.S. TV market and further reduced Roku’s TV sales. Its overall U.S. TV unit sales declined below pre-COVID-19 levels. Some of ROKU’s TV OEM partners were hit hard due to inventory challenges negatively impacting sales figures and market share in the fourth quarter.
ROKU's player revenue decreased 9.5% year-over-year to $161.70 million in its fiscal 2021 fourth quarter, ended Dec. 31, 2021. The company's total operating expenses rose 49.1% year-over-year to $358.30 million. Its income from operations decreased 67.2% year-over-year to $21.4 million, and its adjusted EBITDA declined 23.6% from a year-ago value to $86.70 million. Its net income and net income per share came in at $23.69 million and $0.17, respectively, registering a decline of 64.8% and 65.3% from the prior-year period.
The Street expects ROKU's loss per share to amount to $0.37 for its fiscal year 2022 second quarter, ending June 30, 2022, representing a 171.2% rise from the prior-year period. The stock has declined 71.4% in price over the past six months and 74.4% over the past year. It closed yesterday's trading session at $91.63. ROKU’s year-to-date decline translates to 60.7%.
ROKU's POWR Ratings reflect its weak prospects. The company has an overall D rating, which translates to Sell in our proprietary rating system.
ROKU has an F grade for Stability and a D grade for Growth and Value. It is ranked #54 of 61 stocks in the D-rated Consumer Goods industry.
To see additional POWR Ratings (Sentiment, Momentum, and Quality) for ROKU, click here.
NVTA shares were trading at $5.43 per share on Friday morning, up $0.21 (+4.02%). Year-to-date, NVTA has declined -64.44%, versus a -10.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
4 Cathie Wood Stocks That Remain Sells Even After Falling by More Than 50% StockNews.com
