It is easy for growth-minded investors to quickly accept Cathie Wood’s new stock ideas. The top money manager is the brain behind ARK Invest’s closely followed ETFs that thoroughly beat the market last year and gives daily updates about her market moves.

Unity Software (U), UiPath (PATH), and Spotify (SPOT) are all among her buys this Tuesday. Let’s see why these three stocks might have been chosen.

Unity Software

We are spending more time playing video games these days, and Unity Software aids developers in cashing in on the trend. Unity’s cloud-based product for real-time 3D content is getting much more popular, and the possibility is massive as Unity’s market increases from gaming to Hollywood studios, engineers, architects and graphic designers.

Revenue went up 43% last year, with a 39% top-line boost in February’s Q4 report. Last month it increased its growth sequentially, giving a 41% uptick in revenue for its fiscal Q1. Unity has turned around sharply since hitting a high in December. It is now beginning to come back, but it’s still at 44% under the highs of six months ago. Wood is not afraid to pay for growth stocks, but going for a markdown is an even better play.

UiPath

Wood is also not afraid to go for hot IPOs. UiPath became public in April and was priced at $56. The producer of enterprise software automation has risen 36% through Tuesday’s ending. UiPath’s platform provides robotics automation that aids companies in scaling their digital operations. It is all about robotics handling the lower level company tasks to help efficiency and labor costs.

UiPath produced heavy growth in its financial numbers after Tuesday’s ending. Revenue was at $186.2 million for Q1 of fiscal 2022 and that is a 65% y/y increase. Annual revenue went up by 64% to $652.6 million over the previous year. That is a big step up, but the stock went sharply lower this Wednesday. Revenue increased 81% in fiscal 2021, so this is really top-line deceleration. It’s still strong. The big run in under two months means a correction is natural. Wood maybe wanted to get in before a possible amazing performance on the way back up.

Spotify

The only name on the list that is not a recent IPO is Spotify. The popular streaming service hit the market as a listing three years back. Spotify is a juggernaut in music. There are now 356 million monthly users, higher by 24% over the previous year. It is still giving double-digit growth across all areas.

Over half of those customers are ad-supported users who don’t pay, but Spotify has good numbers on the premium side. They reported 158 million paying customers as of March, a 21% y/y increase. Spotify has attempted to differentiate itself from the other players in the market by going into podcasting. There are now 2.6 million podcasts on its service, including exclusive shows.

Spotify is a couple of years from profitability, but investors can be patient because Spotify is expanding and building its global audience in all the ways that matter.

Author: Scott Dowdy

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