The equity markets have remained under pressure since the beginning of the year, with lingering core inflation and the latest Federal rate hikes. Furthermore, the Fed might announce three more interest rate increases this year, extending the bearish market sentiment. Despite the continuing tech rout, Cathie Wood stocks remain highly overvalued. The ARK Innovation ETF (ARKK) has declined 29.4% over the past month.
Popular CNBC host Jim Cramer has shifted his opinion regarding Cathie Woods stocks and warned investors to avoid stocks that Cathie Wood is buying. Furthermore, persistent underperformance of the stocks of concern recently prompted Morningstar analysts to downgrade ARKK from Neutral to Negative.
Given this backdrop, we think overvalued Cathie Wood stocks Roku, Inc. (ROKU), Teladoc Health, Inc. (TDOC), UiPath Inc. (PATH), Intellia Therapeutics, Inc. (NTLA), and Shopify Inc. (SHOP), are best avoided now.
Roku, Inc. (ROKU)
ROKU in San Jose, Calif., and its subsidiaries operate a TV streaming platform. The company operates in two segments–Platform and Player. Its platform allows users to discover and access various movies and TV episodes and live TV, news sports, shows, and others. Currently, Roku has approximately 60.10 million active accounts. The stock has an 8.37% weighting in ARKK.
ROKU’s total net revenue increased 27.8% year-over-year to $733.70 million for the first quarter, ended March 31, 2022. However, its player revenue came in at $86.80 million, down 19.4% year-over-year. Also, its loss from operations came in at $23.49 million, compared to $75.81 million in income from operations in the previous period. The company’s net loss was $26.31 million, compared to a net income of $76.30 million in the prior-year period, while its loss per share came in at $0.19, compared to an EPS of $0.54 in the year-ago period.
In terms of forward EV/S, ROKU’s 3.14x is 42.2% higher than the 2.21x industry average Furthermore, its 3.59x forward P/S is 163.7% higher than the 1.36x industry average.
ROKU’s EPS is estimated to decline 212.5% for the quarter ended Sept. 30, 2022. Its EPS is expected to remain negative in 2022 and 2023. The stock has declined 16% in price over the past month to close Friday’s trading session at $97.84.
ROKU’s POWR Ratings reflect its poor prospects. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting. It has an overall D grade, which equates to Sell in our POWR Ratings system.
It has a D grade for Growth, Value, Stability, and Sentiment. Click here to access the additional POWR Ratings for ROKU (Momentum and Quality). It is ranked #54 of 61 stocks in the D-rated Consumer Goods industry.
Teladoc Health, Inc. (TDOC)
TDOC in Dallas, Tex., provides virtual healthcare services in the United States and internationally. The company offers services and solutions covering non-urgent, episodic, chronic, and complicated medical conditions. TDOC has a 4.82% weighting in ARKK.
On April 22, 2022, TDOC announced its agreement with Northwell Health to deliver connected and advanced cum all-inclusive virtual care. However, the collaboration might fall short of optimum profits in the near future.
TDOC’s total revenue increased 24.6% year-over-year to $565.35 million for the first quarter ended March 31, 2022. However, its net loss came in at $6.67 billion, compared to a $199.65 million loss in the previous period. Its loss per share came in at $41.58 compared to a $1.31 loss per share in the prior-year period. Furthermore, its adjusted EBITDA came in at $54.50 million, down 3.7% year-over-year.
In terms of forward EV/EBITDA, TDOC’s 24.96x is 93% higher than the 12.93x industry average. Its 22.70x forward P/CF is higher than the 16.26x industry average.
TDOC’s EPS is expected to decrease by 1,471.8% in 2022. Its EPS is estimated to remain negative in 2022 and 2023. Also, it missed EPS estimates in two of the four trailing quarters. Over the past month, the stock has declined 51.2% in price to close Friday’s trading session at $33.59.
TDOC has an overall D rating, which equates to Sell in our POWR Ratings system. The stock has an F grade for Sentiment and a D grade for Value, Momentum, Stability, and Quality.
We have also rated it for Growth. Click here to access all the TDOC ratings. It is ranked #80 of 83 stocks in the D-rated Medical - Services industry.
Click here to checkout our Healthcare Sector Report for 2022
UiPath Inc. (PATH)
PATH in New York City provides an end-to-end automation platform that offers a range of robotic process automation (RPA) solutions, primarily in the United States, Romania, and Japan. The company provides a suite of interrelated software to build, manage, run, engage, measure, and govern automation within the organization. PATH has a 4.24% weighting in ARKK.
For the fourth quarter, ended Jan. 31, 2022, PATH’s total revenue increased 39.4% year-over-year to $289.70 million. However, its operating loss was $50.88 million, compared to $14.59 million in operating income in the year-ago period. The company’s net loss came in at $63.11 million, compared to $26.26 million in net income in the prior-year period. Its loss per share came in at $0.12.
In terms of forward EV/S, PATH’s 7.13x is 156.4% higher than the 2.78x industry average. Also, its 8.82x forward P/S is 214.7% higher than the 2.80x industry average.
PATH’s EPS is estimated to decline 600% for the quarter ended July 2022. Its EPS is expected to remain negative in 2023. Over the past month, the stock has declined 12.8% in price to close Friday’s session at $17.63.
PATH’s POWR Ratings are consistent with this bleak outlook. It has an overall D rating which equates to Sell in our POWR Ratings system. It has a D grade for Value and Stability.
We have graded PATH for Growth, Momentum, Sentiment, and Quality. Click here to access all the PATH’s ratings. It is ranked #24 of 26 stocks in the F-rated Software - SAAS industry.
Click here to check out our Software Industry Report for 2022
Intellia Therapeutics, Inc. (NTLA)
Cambridge, Mass.-based NTLA, a genome editing company, focuses on developing therapeutics. It is a leading clinical-stage genome editing company. Its two programs are in vivo and ex vivo. NTLA has a 3.62% weighting in ARKK.
NTLA’s collaboration revenue was $11.25 million, up 74.6% year-over-year for the first quarter, ended March 31, 2022. However, its operating loss came in at $144.25 million, compared to a $46.42 million loss in the prior-year period. Its net loss came in at $146.87 million, compared to a $46.20 million loss in the year-ago period, while its loss per share came in at $1.96, compared to a $0.69 loss per share.
In terms of forward EV/S, NTLA’s 57.76x is significantly higher than the 3.50x industry average. Its 77.05x forward P/S is higher than the 4.23x industry average.
NTLA’s revenue is expected to decline 11.2% to $40.32 million in 2023. Its EPS is estimated to decrease by 55% in 2022. In addition, its EPS is expected to remain negative in 2022 and 2023. The stock has declined 22.9% in price over the past month to close Friday’s trading session at $48.60.
NTLA has an overall F rating, which equates to a Strong Sell in our POWR Ratings system. It has a D grade for Value, Momentum, Stability, Sentiment, and Quality.
Click here to access the additional POWR Ratings for NTLA (Growth). NTLA is ranked #372 of 388 stocks in the F-rated Biotech industry.
Shopify Inc. (SHOP)
Headquartered in Ottawa, Canada, SHOP is a commerce company that provides a commerce platform and services in Canada, the United States, Europe, the Middle East, Africa, the Asia Pacific, and Latin America. It has a 3.22% weighting in ARKK.
For the first quarter ended March 31, 2022, SHOP’s revenues increased 21.7% year-over-year to $1.20 billion. However, its net loss came in at $1.47 billion, compared to $1.26 billion in net income in the year-ago period. Its loss per share was $11.70, compared to $9.94 in EPS in the prior-year period. The company’s cash and cash equivalents came in at $2.45 billion, for the period ended March 31, 2022, compared to $2.50 billion for the period ended Dec. 31, 2021.
In terms of forward EV/S, SHOP’s 7.68x is 176.5% higher than the 2.78x industry average. Also, its 8.72x forward P/S is 210.5% higher than the 2.81x industry average.
SHOP’s EPS is estimated to decline 81% to $1.54 in 2022. It missed its EPS estimates in two of the trailing four quarters. Over the past month, the stock has declined 33.5% in price to close yesterday’s session at $402.48.
SHOP’s POWR Ratings are consistent with this bleak outlook. It has an overall F rating, which equates to a Strong Sell in our POWR Ratings. It has an F grade for Sentiment and a D grade for Growth, Value, Stability, and Quality.
We also have graded SHOP for Momentum. Click here to access all of SHOP’s ratings. It is ranked last of 33 stocks in the F-rated Internet - Services industry.
ROKU shares were trading at $95.54 per share on Monday afternoon, down $2.30 (-2.35%). Year-to-date, ROKU has declined -58.13%, versus a -15.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
5 Cathie Wood Stocks That Remain Overvalued Despite the Market Correction StockNews.com
