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5 Investment Opportunities With Over 700% Upside, According to Cathie Wood

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Cathie Wood is the head of Ark Invest, an investment company managing several exchange-traded funds. By focusing on “big ideas” like artificial intelligence, gene editing, and outer space, Wood has amassed a faithful following of futuristically minded investors. Which is why you’re here: You want to know which stocks are changing the world and consequently have at least 700% upside, according to Wood.

Here are the five investment opportunities: Zoom Video Communications (ZM -0.28%), Roku (ROKU 1.63%), Bitcoin (BTC -0.43%), Block (SQ 1.94%), and Tesla (TSLA 3.23%). Ark Invest and Wood have price targets for all of these, ranging from 700% upside to nearly 6,000% upside in Bitcoin’s case.

I believe Wood’s commentary about these five investment opportunities is valuable — the team at Ark Invest actively researches its big ideas and condenses those findings down for us. It’s a useful tool.

However, there’s one quintessential thing missing from the aforementioned tool. And this one thing can make or break you as an investor. Don’t worry: I’ll share which of these five ideas I believe is the most attractive investment today. But I hope you’ll walk away from this article better equipped to make that call for yourself.

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Here’s why Cathie Wood loves these five ideas

At the end of the day, Cathie Wood is an investor like you and me. And to invest in something (not speculate), it’s imperative to develop an investment thesis: a succinctly expressed opinion of what will happen in the future that would cause your investment to go up.

Below are Wood’s price targets for these five investments. However, Wood didn’t give these price targets in a vacuum. To the contrary, each price target came with an investment thesis — that’s the more important part for investors. Here’s my brief synopsis of each one:

  • Zoom price target: $1,500 per share by 2026. Over the next three to four years, Ark Invest believes that Zoom’s user base can triple or more. And it believes that its average revenue per user can triple or more. This exponential top-line growth will result in better profit margins for the company. And assuming the stock’s valuation remains comparable to what it is now, this will all result in life-changing returns for shareholders.
  • Roku price target: $605 per share by 2026. Over the next three to four years, active accounts on Roku could triple or more. And these Roku users will stream more video content than they are right now. This engaged and incredibly large user base will allow the platform to demand higher ad rates, resulting in outsize revenue growth. Like Zoom, Ark Invest believes this revenue growth will help Roku’s profit margins and send the stock soaring.
  • Bitcoin price target: $1 million per coin by 2030. Compared to asset classes like real estate, gold, and bonds, Bitcoin’s market capitalization is small. But Wood believes many catalysts will change that, including the following: More people will use it to store value, countries will hold some Bitcoin in their treasuries, major enterprises will add it to their balance sheets, and regular people will increasingly use it as money — as a means of exchange on financial transactions. And all of this demand will help push the value of each coin to $1 million.
  • Block price target: $500 per share by 2025. In general, Ark Invest sees an incredible secular trend underway right now: People are abandoning traditional banks in favor of fintech solutions like Block. The investment company believes that one of the biggest drivers for Block’s business over the next few years will be Block’s Cash App. It not only projects impressive growth in active Cash App users, but it also believes Block will monetize users at a better rate. This will be a primary driver of shareholder returns, although Ark Invest does see additional upside in its Square and crypto ecosystems.
  • Tesla price target: $4,600 per share by 2026. By 2026, Ark Invest expects Tesla’s annual revenue from electric vehicle sales to be an order of magnitude (10 times) larger than what it was in 2021. More than this, it expects the company to generate over $100 billion just with its ride-sharing network — something that doesn’t yet exist. This scale will allow its gross margin to double over the next few years, unlocking greater profitability and a much higher price per share.

Wood may be wrong about many of these assumptions. But here’s the point right now: Long-term investing is based on fundamental analysis like the above. It’s not based on lines on a chart, but rather concrete developments in the real world.

Whenever you buy a stock, you should be able to clearly articulate what you believe is going to happen and how that will make your investment gain in value. Ark Invest clearly does that.

Dissecting Wall Street’s opinions

For any investor hoping to glean insight from Wood’s investment theses, my first recommendation would be to throw away the price targets with each. Start dissecting Wall Street’s opinions by looking at the core assumptions.

Largely absent from the five investment theses listed above is a healthy dose of pessimism — what could go wrong. But that’s the quintessential quality you need to develop to be a well-balanced investor. You must learn to consider both sides of an argument.

For example, only parts of Ark Invest’s investment thesis for Roku are on track right now. In the third quarter of 2022, the company had 65.4 million active accounts, up 16% year over year. So, it’s gaining users like Ark Invest hopes. And streaming hours per active user were also up in Q3, which is another part of the investment thesis.

However, Roku’s profit margin hasn’t been expanding with greater scale and there’s reason to believe that negative trend could continue. The company’s hardware devices cost more to make than what the company is able to sell them for. And in Q3, Roku announced the launch of Roku Smart Home, which will usher in an entire portfolio of hardware devices that will be sold cheaply, potentially hurting profits. This lack of profitability could put a damper on the roughly 1,000% upside implied with Ark Invest’s price target.

Similarly, I believe it may be a tad optimistic to project more than $100 billion in revenue for Tesla from a business segment that doesn’t exist yet. If it fails to launch soon, that would almost assuredly drag down this key component to Ark Invest’s $4,600 per share price target.

In the end, I could poke holes in the investment theses from Ark Invest for all five of these ideas, even though I own four of them. I nonetheless value the opinions of Wood and others because there’s always perspective they bring to the table. However, it’s still healthy to look at both sides of the argument before drawing your own conclusions.

If you don’t read any further, let this be your actionable takeaway: Never let someone else’s price target be your reason for buying. Always consider what could go right and what could go wrong before investing.

Why Zoom stock stands out from the rest

For those still with me, I’ll keep my promise and share why I believe Zoom stock is the best opportunity right now of these five. But starting with a caveat, I believe there’s zero chance it will hit Ark Invest’s price target of $1,500 per share by 2026. That’s OK with me because I believe it can still beat the market.

Some investors believed Zoom’s relevance would die as COVID-19 restrictions loosened. And they’re partly right. Zoom records revenue from consumers in its online segment. Revenue from the online segment has dropped throughout its fiscal 2023 (which mostly runs through calendar 2022) and management expects an 8% year-over-year drop for the whole year for this part of the business.

However, Zoom’s enterprise business is still growing and now accounts for more than half of the business — this will be the value driver in coming years, in my opinion.

All of Zoom’s ancillary products have an enterprise customer focus. Zoom Phone looks to upgrade internal phone system at office buildings. Zoom Rooms modernizes conference rooms. And newly launched Zoom Mesh is a content delivery network built for enterprises — it speeds up internet connections.

Through the first three quarters of fiscal 2023, Zoom’s research and development (R&D) expenses have more than doubled from the comparable period of fiscal 2022. However, developing new services for enterprise customers is imperative. And even though it’s spending more, the company remains profitable.

I expect these R&D investments to eventually pay off for Zoom with reinvigorated revenue growth from a loyal enterprise customer base. As I said, I don’t expect $1,500 per share. But long-term, market-beating returns are likely from here. But that said, you should seek out the counterargument to my own before deciding to invest in Zoom stock for yourself.

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Zacks Investment Ideas feature highlights: Alphabet, Tesla, Shopify, Amazon and Palo Alto

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For Immediate Release

Chicago, IL – February 2, 2023 – Today, Zacks Investment Ideas feature highlights Alphabet GOOGL, Tesla TSLA, Shopify SHOP, Amazon AMZN and Palo Alto Networks PANW.

Which of These Stocks Has Been the Best Buy, Post-Split?

Stock splits have been a regular occurrence in the market over the last several years, with many companies aiming to boost liquidity within shares and knock down barriers for potential investors.

Of course, it’s important to remember that a split doesn’t directly impact a company’s financial standing or performance.

In 2022, several companies performed splits, including Alphabet, Tesla, Shopify, Amazon and Palo Alto Networks. Below is a chart illustrating the performance of all five stocks over the last year, with the S&P 500 blended in as a benchmark.

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As we can see, PANW shares have been the best performers over the last year, the only to outperform the general market.

However, which has turned in a better performance post-split? Let’s take a closer look.

Tesla

We’re all familiar with Tesla, which has revolutionized the EV (electric vehicle) industry. It’s been one of the best-performing stocks over the last decade, quickly becoming a favorite among investors.

Earlier in June of 2022, the mega-popular EV manufacturer announced that its board approved a three-for-one stock split; shares began trading on a split-adjusted basis on August 25th, 2022.

Since the split, Tesla shares have lost roughly 40% in value, widely underperforming relative to the S&P 500.

Palo Alto Networks

Palo Alto Networks offers network security solutions to enterprises, service providers, and government entities worldwide.

PANW’s three-for-one stock split in mid-September seemingly flew under the radar. The company’s shares started trading on a split-adjusted basis on September 14th, 2022.

Following the split, PANW shares have struggled to gain traction, down roughly 15% compared to the S&P 500’s 3.3% gain.

Shopify

Shopify provides a multi-tenant, cloud-based, multi-channel e-commerce platform for small and medium-sized businesses.

SHOP shares started trading on a split-adjusted basis on June 29th, 2022; the company performed a 10-for-1 split.

Impressively, Shopify shares have soared for a 50% gain since the split, crushing the general market’s performance.

Alphabet

Alphabet has evolved from primarily being a search engine into a company with operations in cloud computing, ad-based video and music streaming, autonomous vehicles, and more.

Last February, the tech titan announced a 20-for-1 split, and investors cheered on the news – GOOGL shares climbed 7% the day following the announcement. Shares started trading on a split-adjusted basis on July 18th, 2022.

Alphabet shares have sailed through challenging waters since the split, down 10% and lagging behind the S&P 500.

Amazon

Amazon has evolved into an e-commerce giant with global operations. The company also enjoys a dominant position within the cloud computing space with its Amazon Web Services (AWS) operations.

AMZN’s 20-for-1 split was a bit of a surprise, as it was the company’s first split since 1999. Shares started trading on a split-adjusted basis on June 6th, 2022.

Following the split, Amazon shares have lost roughly 18% in value, well off the general market’s performance.

Bottom Line

Stock splits are typically exciting announcements that investors can receive, with companies aiming to boost liquidity within shares.

Interestingly enough, only Shopify shares reside in the green post-split of the five listed.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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$13 million investment in Campbellford Memorial Hospital

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The Campbellford Memorial Hospital will be receiving a $13 million investment from the Ontario Government to address infrastructure concerns.

The announcement was made at the hospital by Northumberland—Peterborough South MPP David Piccini.

The $13 million is broken down as follows:

  • $9,639,900 will be going to CMH as one-time capital funding to address the HVAC and generator
  • $1,874,929 for reimbursement of CMH’s COVID-19-related capital expenses
  • $771,797 in COVID-19 incremental operating funding
  • up to $600,000 in one-time funding to support the hospital’s in-year financial and operating pressures
  • $163,600 in pandemic prevention and containment funding
  • $81,132 through the Health Infrastructure Renewal Fund
  • $46,884 in health human resources funding.

Interim President and CEO Eric Hanna welcomed the news, saying much needs to be done about the HVAC and generator.

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At the announcement, Hanna spoke of the issues with the generator.

“I’ve got the wee little generator up at the lake and then I’m thinking well, everything should be going well at the hospital,” Hanna told the audience in attendance.

“You get a call from the person in charge who says, ‘Guess what Eric? Generator didn’t start. Oh, so what does that mean? There’s no power in the hospital.’  That’s happened a couple of times in the past year and the generator is over 30 years old.”

Hanna says the solution was not as easy as replacing the generator.

“You can go buy the generator and that may be about a million dollars. But then when we found out afterwards, we came to hook up the new generator to the electrical distribution system and said it won’t work with that because your electrical distribution system is 1956. You can’t plug this generator into that. So now we’re putting close to $5 million into a whole electrical distribution system so the generator will work. It’s part of that ongoing thing and that’s why these costs continue to go up.”

The HVAC system was also something addressed by Hanna.

“It’s a contract close to $7 million to replace that. This wing, for example. There’s no fresh air in this wing. It hasn’t worked in here for 15 years. So now this is administrative areas and the concern was that in some of the patient carriers, it wasn’t working either.  So – having those discussions with David (Piccini) and saying what we have to do to correct this.”

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Chile’s Enap Set to Slash Debt Burden That Weighed on Investment

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(Bloomberg) — Enap, Chile’s state oil and gas company, plans to use near-record earnings to slash its debt burden, while increasing investment in its refineries and in exploration and production.

The company aims to reduce its debt load to about $3 billion “medium term” from the current $4.3 billion, Chief Executive Officer Julio Friedmann said in an interview. Plans include a bond sale in the first half of this year to refinance some securities.

The improved financial position — with 2022 profit surging to $575 million — comes after Enap’s oil and gas operations in Egypt, Ecuador and Argentina got a boost from high crude prices, while healthy international refining margins benefited plants in Chile. Those trends are expected to extend into this year and next, enabling the company to pre-pay some short-term obligations. About half of the current debt burden matures in the next three years.

“We are going to issue bonds,” the MIT-trained executive said Wednesday from the Aconcagua refinery in central Chile. “We are closely evaluating the local and international markets.”

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At the same time, Friedmann, who took the reins at Enap in November, plans to increase capital expenditure to about $700 million this year from $550 million last year.

The increase comes after underinvestment in the past few years because of Covid restrictions and the heavy debt load. Spending will focus on making treatment processes cleaner and upgrading infrastructure, as well as a more aggressive approach to increasing gas reserves in the far south of the country, he said.

Gas Markets

Enap plans to expand in both liquefied petroleum gas and natural gas markets in Chile, focusing on the wholesale business and eventually selling directly to large-scale consumers such as mines. Organizational changes to enable the expansion will be announced soon. There are no plans to enter the final distribution business, Friedmann said. The company wants to supply more gas to southern cities as a way of replacing dirtier fuels such as wood and diesel.

Enap and its partners are also preparing pipelines and a refinery near Concepcion to start receiving crude from Argentina’s Neuquen basin sometime this year in an arrangement that could supply as much as 30% of its needs.

While there’s plenty of potential do collaborate more with energy-rich Argentina, particularly in the Magallanes area, that would require greater long-term visibility on supplies from the neighboring country, Friedmann said.

He sees a role for Enap in the development of green hydrogen in Chile. It’s in talks with three companies to enable its facilities in Magallanes to be used to receive all the wind turbines, electrolyzers and other equipment that will be needed to make the clean fuel. Enap is also evaluating its own small pilot plants and will consider whether to take up options to enter other green hydrogen projects as an equity partner.

While the company will maintain its focus on meeting rising demand for traditional fuels, it anticipates new regulation that will require lower emissions. It’s also looking closely at clean-fuel options for aviation, Friedmann said.

(Adds clean fuel plans in last paragraph. I previous version corrected spelling of CEO’s surname.)

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