Since hitting a peak in February 2021, institutional investor Cathie Wood’s flagship Ark Innovation ETF (ARKK) has declined more than 60%, erasing its pandemic era gains. The macroeconomic headwinds, including 40-year high inflation, the Fed’s now hawkish monetary stance, and the economic ramifications of Russia’s invasion of Ukraine, have factors that have conspired to perplex the tech sector. These factors have triggered a brutal tech selloff, with the benchmark Nasdaq Composite Index down 18.5% year-to-date. However, various high-quality companies have been trading at discounted valuations, providing investors with great buy-the-dip opportunities.
Due to rapid digitalization across various industries, growing tech dependence, and increasing corporate tech spending, the tech industry is expected to grow robustly in 2022. The adoption of emerging new and advanced technologies, including 5G, IoT, artificial intelligence (AI), robotics, and automation, might boost the industry’s growth. Wood considers the dramatic pullbacks in the tech sector as an excellent opportunity to invest in stocks with explosive long-term growth potential.
Given this backdrop, Wall Street analysts expect Wood’s favorite tech stocks Twilio Inc. (TWLO), UiPath Inc. (PATH), Shopify Inc. (SHOP), Roblox Corporation (RBLX), and Coinbase Global, Inc. (COIN) to surge in price in the coming months.
Twilio Inc. (TWLO)
TWLO in San Francisco, provides a cloud communications platform that allows developers to build and operate customer engagement within software applications in the U.S and internationally. The company’s platform offers a set of application programming interfaces (APIs). The APIs enable developers to embed voice, messaging, video, and email capabilities into their applications and support every type of customer engagement. The stock has 2.65% weighting in ARK’s portfolios.
In December, TWLO launched Twilio Ventures that are designed to unlock the imagination of builders and start-up communities that are building the future of customer engagement. Twilio’s $50 million funds will invest in early-stage companies with opportunistic investments in late-stage companies. The company’s recent investments include Algolia, Mux, Hyro, Calixa, Well Health Inc., and Terazo.
In its fiscal year 2021 fourth quarter, ended Dec. 31, 2021, TWLO's revenues increased 53.8% year-over-year to $842.74 million. Its Non-GAAP gross profit grew 40.9% from the prior-year period to $431.95 million. The company's cash and cash equivalents rose 58.4% year-over-year to $1.48 billion for its fiscal 2021 (ended December 31). Its total current assets increased 75.9% from the prior year to $5.93 billion.
The $863.81 million consensus revenue estimate for its fiscal year 2022 first quarter, ended March 31, 2022, represents 46.4% growth year-over-year. TWLO has an impressive revenue surprise history; it has surpassed the consensus revenue estimates in each of the trailing four quarters.
The stock declined 20.7% in price over the past month and 36.1% over the past three months. It closed Friday's trading session at $122.66.
Among the 26 Wall Street analysts that rated TWLO, 25 rated it Buy, while one rated it Hold. The 12-month median price target of $308.08 indicates a 150.9% potential upside. The price targets range from a low of $170.00 to a high of $510.00.
Click here to check out our Cloud Computing Industry Report for 2022
UiPath Inc. (PATH)
PATH in New York City operates an end-to-end automation platform that offers robotic process automation (RPA) solutions in the U.S., Romania, and Japan. The company’s platform combines artificial intelligence with desktop recording, offers intuitive visualization tools and low-code development environments, and deploys robots, automation, and ML models across the enterprise. It serves banking, healthcare, financial services, and government entities. PATH has a 7.14% weighting in ARK’s portfolio.
On April 18, PATH entered a strategic partnership with NCS to deploy enterprise-grade automation capabilities across Asia-Pacific. The joint effort will bring automation to public and private enterprises across industries, particularly in high-growth markets like Singapore, Australia, and the Asia Pacific. The partnership is expected to expand the company’s market reach and boost revenue streams.
On March 21, PATH launched its enhanced Technology Partner Program that enables partners to build, scale and operate on the UiPath Platform. The UiPath technology Partner Program includes a wide range of new technical, sales, and marketing offerings for partners and helps them grow their businesses and break into new markets. This robust program provides automation build benefits, sales and business development benefits, and marketing benefits.
PATH's total revenue increased 39.4% year-over-year to $289.70 million in its fiscal 2022 fourth quarter, ended Jan. 31, 2021. For its fiscal year 2022, ended Jan. 31,2022, its cash and cash equivalents rose 394.5% year-over-year to $1.77 billion, while its total current assets increased 210.1% from the previous year to $2.28 billion. In addition, its net cash provided by financing activities improved 486.9% year-over-year to $1.47 billion.
Analysts expect PATH's revenue for its fiscal 2023 first quarter, ending April 30, 2022, to come in at $226.90 million, representing a 21.9% rise year-over-year. The company has an impressive revenue surprise history; it has surpassed the consensus revenue estimates in each of the trailing four quarters.
Shares of PATH have decreased 48.3% in price over the past three months and closed Friday's trading session at $17.95. It has declined 58.4% year-to-date.
Among the 18 Wall Street analysts that rated PATH, 12 rated it Buy, while six rated it Hold. The 12-month median price target of $37.03 indicates a 106.3% potential upside. The price targets range from a low of $23.00 to a high of $57.50.
Shopify Inc. (SHOP)
Headquartered in Ottawa, Canada, SHOP is a commerce company that provides a commerce platform and services in Canada, the U.S., Europe, the Middle East, Africa, Asia-Pacific, and Latin America. The company’s platform allows merchants to display, market, and sell their products through various sales channels. It also offers custom themes and apps and merchant solutions. The stock has 0.81% weighting in ARK’s portfolio.
Last August, SHOP introduced TikTok Shopping to merchants, enabling those with a TikTok business account to add products that link directly to their online store checkout. This new introduction might boost the company’s profitability.
In the same month, SHOP launched Shopify POS hardware, integrated retail hardware, and payments to retail merchants in the U.K., Australia, Ireland, Germany, New Zealand, and the Netherlands, followed by Belgium and Denmark in January and Spain in February 2022. This is expected to boost the company’s business growth.
In its fiscal year 2021 fourth quarter, ended Dec. 31, 2021, SHOP's revenues increased 41.1% year-over-year to $1.38 billion. Its non-GAAP gross profit improved 37.2% from the prior-year period to $700.61 million. The company's current assets rose 24.2% year-over-year to $8.54 billion for its fiscal 2021 (ended December 31). Its net cash provided by operating activities increased 18.7% from the prior year to $504.43 million.
The $6.05 billion consensus revenue estimate for its fiscal year 2022 represents 31.1% growth year-over-year. The Street expects the company's EPS for its fiscal year 2023 to increase 48.8% year-over-year to $4.80. It is no surprise that it has surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock slumped 66.6% in price year-to-date. However, the 12-month median price target of $986.51 indicates a 114.5% potential upside from its last closing price of $459.97. The price targets range from a low of $625.00 to a high of $1,500.00. Among the 29 Wall Street analysts that rated SHOP, 15 rated it Buy, while 14 rated it Hold.
Roblox Corporation (RBLX)
RBLX in San Mateo, Calif., develops and operates an online entertainment platform and serves customers in the U.S., the United Kingdom, Canada, Europe, China, Asia-Pacific, and internationally. The company provides Roblox Studio, a free toolset to build and operate 3D content, Roblox Client, an application to explore 3D digital world, and Roblox Education for learning experiences and Roblox Cloud. RBLX has a 1.16% weighting in ARK’s portfolio.
In February, RBLX teamed up with National Football League (NFL) to expand its metaverse presence with NFL tycoon experience. “Partnering with NFL, a digital innovator, brings more ways for our community to celebrate their fandom. We are excited to see sports and entertainment evolve to bring in fun, authentic and engaging experiences that push the boundaries of creativity and bring fans closer to some of the biggest moments in sports and culture,” said Christina Wootton, VP, Global Brand Partnerships at RBLX.
RBLX's revenue increased 83.5% year-over-year to $568.77 million in its fiscal year 2021 fourth quarter, ended Dec. 31, 2021. Its cash inflow from financing activities improved 18,103.6% year-over-year to $1 billion for the fourth quarter. The company's cash and cash equivalents rose 236.1% year-over-year to $3 billion, while its total current assets increased 163.3% from the prior year to $3.75 billion for its fiscal year 2021 (ended Dec. 31, 2022).
Analysts expect RBLX's revenue for its fiscal year 2022, ending Dec.31, 2022, to come in at $2.97 billion, representing a 9% rise year-over-year. The Street expects the company's EPS for the current year to grow 4% year-over-year.
The stock has declined 27% in price over the past month and 50.2% over the past three months. It closed Friday's trading session at $34.35.
Among the 14 Wall Street analysts that rated RBLX, nine rated it Buy, four rated it Hold, while one rated it Sell. The 12-month median price target of $64.50 indicates an 87.8% potential upside. The price targets range from a low of $45.00 to a high of $100.00.
Coinbase Global, Inc. (COIN)
San Francisco-based COIN is a financial technology company that offers end-to-end financial infrastructure and technology for the crypto economy in the U.S. and internationally. The company provides retail users the primary financial account for the crypto economy, a marketplace with liquidity for transacting in crypto assets, and technology and related services to allow partners to build crypto-based applications and accept crypto assets as payments securely. The stock has a 3.23% weighting in ARK’s portfolio.
Last September, COIN announced the pricing of $1 billion of 3.38% senior notes due 2028, and $1 billion of 3.63% senior notes due 2031. The capital raising might strengthen COIN’s strong balance sheet with low-cost capital. The company intends to use the net proceeds from the notes offering for general corporate purposes, including product development and potential M&A.
In its fiscal 2021 fourth quarter, ended Dec. 31, 2021, COIN's total transaction revenue was $2.28 billion, representing a 377.9% increase versus the same period in 2020. The company’s net revenue improved 400.9% from the prior-year period to $2.49 billion. Its cash and cash equivalents grew 570.9% from the last year to $7.12 billion, while its total current assets rose 257.9% year-over-year to $18.37 billion for its fiscal 2021 (ended December 31).
The $8.63 billion consensus revenue estimate for its fiscal 2023 represents 19.3% growth year-over-year. The Street expects the company's EPS for the same year to increase 36.5% year-over-year to $5.51. It is no surprise that COIN has surpassed the consensus EPS estimates in three of the trailing four quarters.
Over the past month, the stock slumped 29.6% in price to close Friday’s trading session at $131.52. However, the 12-month median price target of $283.00 indicates a 115.2% potential upside. The price targets range from a low of $135.00 to a high of $500.00. Among the 17 Wall Street analysts that rated COIN, 13 rated it Buy, two rated it Hold, while two rated it Sell.
TWLO shares were trading at $127.32 per share on Monday afternoon, up $4.54 (+3.70%). Year-to-date, TWLO has declined -51.65%, 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.
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