After the horrible 2021, Cathie Wood’s ARK Invest ETFs, including the flagship Ark Innovation Fund (ARKK) and ARK Genomic Revolution ETF (ARKG), have lost significantly this year amid the intense market out. The Federal Reserve’s persistent hawkish stance to tame the multi-decade high inflation and growing recession odds have fostered massive tech sell-off.
Moreover, a hot September employment report should keep the Fed on track to approve another outsized interest-rate hike in its November meeting. The tech-heavy Nasdaq composite recently hit its lowest close since July 2020. So, the trouble for Wood’s concentrated portfolio of tech stocks is expected to compound.
Cathie Wood’s ARKK ETF has plummeted 63.2% year-to-date and 67.7% over the past year. The lack of diversification in her flagship fund is the key factor for its underperformance. Ark's latest 13F filing shows that tech stocks made up approximately 34% of its portfolio.
As this year’s bear market proved to be much worse for ARK Invest funds, the firm’s assets under management in all its ETFs declined. Moreover, CEO Cathie Wood’s net worth declined 65% to $140 million.
As the stock market is expected to remain under tremendous pressure in the near term, it could be wise to avoid fundamentally weak and overvalued Cathie Wood stocks Ginkgo Bioworks Holdings, Inc. (DNA), UiPath Inc. (PATH), Rocket Lab USA, Inc. (RKLB), and Verve Therapeutics, Inc. (VERV).
Ginkgo Bioworks Holdings, Inc. (DNA)
DNA develops a platform for cell programming to enable the biological production of products such as novel therapeutics, food ingredients, and chemicals derived from petroleum. The company serves various markets, including specialty chemicals, agriculture, food, consumer products, and pharmaceuticals. The stock has 9.8% ARK ownership.
DNA’s operating expenses increased 664.2% year-over-year to $791.53 million in the second quarter of fiscal 2022 ended June 30, 2022. The company’s loss from operations widened by 979.2% year-over-year to $646.91 million. Net loss attributable to DNA stockholders came in at $668.83 million, worsening 1,139.9% year-over-year, while its loss per share widened 925% year-over-year to $0.41.
In addition, as of June 30, 2022, the company’s cash and cash equivalents stood at $1.38 billion, compared to $1.55 billion as of December 31, 2021.
In terms of its forward EV/Sales, DNA is trading at 8.61x, 557.2% higher than the industry average of 1.31x. The stock’s forward Price/Sales multiple of 11.98 is 1,052% higher than the industry average of 1.04.
Analysts expect DNA’s EPS for fiscal 2022 and 2023 to remain negative. The company’s revenue for fiscal 2023 is expected to decline 7.4% year-over-year to $398.76 million. Shares of DNA have lost 65.7% in price year-to-date and 68.5% over the past year to close the last trading session at $2.98.
DNA’s POWR Ratings are consistent with this bleak outlook. The company has an overall F rating, which translates to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
DNA also has an F grade for Stability and Sentiment. The stock has a D grade for Growth, Value, and Quality. In the F-rated 395-stock Biotech industry, DNA is ranked last.
Click here to access DNA’s ratings for Momentum.
UiPath Inc. (PATH)
PATH provides an end-to-end automation platform that offers a range of robotic process automation (RPA) solutions. The company provides a suite of interrelated software to build, manage, run, and govern automation within the organization. It serves banking, healthcare, financial services, and government entities. PATH has nearly 9.2% ARK ownership.
For fiscal 2023, the company cut its revenue forecast to $1.002 billion to $1.007 million, down from the earlier guidance of $1.085 billion to $1.090 million. “Guidance was lowered due to FX (currency) headwinds, macro pressures, and internal repositioning," RBC Capital analyst Matthew Hedberg said in a note to clients.
Furthermore, PATH’s customer growth slowed in the second quarter. The company only added 170 new customers in the last reported quarter, declining from the 230 new customers added in the first quarter.
In the fiscal 2023 second quarter that ended July 31, 2022, PATH’s operating expenses increased 23.3% from its prior-year quarter to $317.84 million. Its operating loss widened 22.9% from the prior-year quarter to $120.19 million. The company’s net loss came in at $120.38 million, widening 20.4% year-over-year.
In addition, the company’s net loss per share attributable to common stockholders worsened by 15.8% year-over-year to $0.22. Its cash and cash equivalents were $1.61 billion as of July 31, 2022, versus $1.77 billion as of January 31, 2022.
In terms of its forward EV/Sales, PATH is currently trading at 5.00x, 101.9% higher than the industry average of 2.48x. The stock’s forward Price/Sales multiple of 6.43 is 173.6% higher than the industry average of 2.35.
PATH’s loss per share is expected to come in at $0.04 for the fiscal 2023 third quarter ending October 2022. Also, analysts expect the company’s revenue for the fourth quarter (ending January 2023) to be $275.90 million, indicating a decline of 4.8% year-over-year. The company has missed the consensus EPS estimates in three of the trailing four quarters.
The stock has plunged 41.8% over the past six months and 73.2% year-to-date to close its last trading session at $11.78.
PATH’s POWR Ratings reflect its poor prospects. The stock’s overall D rating equates to a Sell in our proprietary rating system.
The stock has a D grade for Momentum, Stability, Value, and Quality.
PATH is ranked #26 of 27 stocks in the D-rated Software-SAAS industry. Click here to access additional POWR Ratings for PATH (Growth and Sentiment).
Rocket Lab USA, Inc. (RKLB)
RKLB is a space company that provides launch services and space system solutions for the defense and space industries. The company’s offerings include spacecraft engineering and design services, spacecraft components, and designing and manufacturing small- and medium-class rockets. The stock has about 0.3% ARK ownership.
For the fiscal 2022 second quarter ended June 30, 2022, RKLB’s operating expenses increased 144.4% year-over-year to $38.12 million. Its operating loss widened by 152.5% from the same period the prior year to $33.16 million. Its net loss worsened by 124.5% from the prior-year period to $37.42 million, while the net loss per share attributable to RKLB came in at $0.08.
In terms of its forward EV/Sales, RKLB is currently trading at 7.11x, 357.9% higher than the industry average of 1.55x. Its forward Price/Book multiple of 8.61 is 656.2% higher than the industry average of 1.14. Moreover, the stock’s forward Price/Book of 2.75x compares with the industry average of 2.35x.
The company’s loss per share for the fiscal year (ending December 2022) is expected to come in at $0.19. Furthermore, analysts expect RKLB’s loss per share to widen by 164.1% from the prior-year period to $0.03 for the fiscal 2023 quarter (ending March 2023).
Shares of RKLB have declined 46.5% over the past six months and 70.2% over the past year to close the last trading session at $4.19.
RKLB’s poor fundamentals are reflected in its POWR Ratings. The stock's overall F rating translates to a Strong Sell in our proprietary rating system.
RKLB has an F grade for Value, Stability, and Quality. In the 74-stock Air/Defense Services industry, it is ranked #72.
Beyond what is stated above, we have also rated RKLB for Growth, Momentum, and Sentiment. Click here to see more of RKLB’s component grades.
Verve Therapeutics, Inc. (VERV)
VERV is a genetics medicines company that develops gene-editing medicine for patients to treat cardiovascular diseases. The company’s lead product candidate is VERVE-101, a single-course gene editing treatment. Also, it engages in the development of the ANGPTL3 program. VERV has nearly 5.5% ARK ownership.
VERV’s loss from operations widened 148.7% year-over-year to $42.19 million in the fiscal 2022 second quarter ended June 30. Its net loss stood at $40.95 million for the quarter, while its net loss per common share attributable to common stockholders came in at $0.84.
As of June 30, 2022, the company’s cash, cash equivalents, and marketable securities were $293.56 million, compared to $360.44 million as of December 31, 2021.
In terms of its forward EV/Sales, VERV is trading significantly higher than the industry average of 3.69x. The stock’s forward Price/Sales multiple of 1,530.28 compares to the industry average of 4.25.
Analysts expect VERV’s loss per share in the current quarter (ended September 2022) to come in at $0.07, indicating a widening of 58% year-over-year. Also, the company is expected to incur losses for at least until next year.
Shares of VERV have slumped 19.2% year-to-date and 28.9% over the past year to close the last trading session at $31.81.
VERV’s POWR Ratings reflect its weak outlook. The stock has an overall D rating, which equates to a Sell in our proprietary rating system. It also has a D grade for Quality, Growth, Momentum, Sentiment, and Stability.
Among the 386 stocks in the F-rated Biotech industry, VERV is ranked #358. To see VERV’s POWR Ratings for Value, click here.
PATH shares rose $0.12 (+1.02%) in premarket trading Wednesday. Year-to-date, PATH has declined -72.69%, versus a -23.81% 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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