Cathie Wood makes almost $100 million on battered tech stock

Her flagship Ark ETF has lost 17% year to date.

Apr 26, 2024 - 06:30

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Cathie Wood makes almost $100 million on battered tech stock

Tesla (TSLA) shares stumbled badly until this week amid falling deliveries, price cuts, and concern that Chief Executive Elon Musk was distracted from his work at the electric vehicle titan.

Tesla stock dropped 43% from the beginning of the year through April 22. But, since then, its shares have rebounded 16%.

And what has propelled them higher? Slivers of good news amid a weak first-quarter earnings report.

As for the bad news, Tesla's net income slid nearly 55% from a year earlier to $1.13 billion, and revenue fell 8.7% to $21.3 billion.

On the plus side, Musk promised to introduce a less expensive electric vehicle as early as late 2024, offsetting worries about its lackluster earnings and diminishing growth prospects for its existing lineup.

It's been a rollercoaster ride over the years for Elon Musk and Tesla, which he heads.
Chesnot/Getty Images

Tesla CEO Elon Musk’s views

"I think we'll have higher sales this year than last year," Musk told investors, even as the company reiterated its forecast for "notably lower" vehicle deliveries for the current year.

"We've updated our future vehicle lineup to accelerate the launch of new models ahead [from the] previously mentioned start of production in the second half of 2025. So, we expect it to be more like the early 2025, if not late this year," Musk said.

Wall Street analysts offered mixed reactions to the earnings report. Alliance Bernstein analyst Toni Sacconaghi argues that the "widespread deployment of [Tesla's Full Self-Driving] is five to 10 years away.”

He said it's by no means a "slam dunk" that the company can grow sales this year, given the weak EV-demand environment.

It may also be a tough ask given that Musk has been cutting prices on Model 3 and Model Y, hoping to spark demand.

Bank of America analyst John Murphy said Musk addressed "key concerns" on the conference call. And he managed to "revitalize the growth narrative" with both his bullish delivery forecast and his wider artificial intelligence and robotics ambitions, Murphy said.

Musk suggested it could begin selling Optimus robots in late 2025. He recently cut the price for its latest full-service driving software (FSD) to $99 per month and plans a Robotaxi event in August to discuss Tesla Cybercab.

Cathie Wood’s recent Tesla stock buys pay off

Famed money manager Cathie Wood is an unabashed admirer of Musk and his goal for a transformation to clean-energy cars from internal combustion engine, or ICE, vehicles.

Earlier this month, she reiterated her $2,000 forecast for Tesla shares (they traded at $166 on April 25). She initiated that goal a year earlier. So, it’s no surprise that Tesla is the biggest holding in Wood’s flagship Ark Innovation ETF (ARKK) .

She regularly buys Tesla stock when it’s falling and picked up a combined 151,982 on April 19 and April 22. That bloc was worth $21.6 million as of the April 22 close, the day before the earnings report.

The stock’s ascent since then has lifted Ark Innovation’s Tesla holding by almost $100 million to $694.9 million as of the April 24 close. That’s quite a killing in only two days.

Wood’s investment history, strategy

To be sure, Wood’s track record may not make you jump aboard for all her trades.

Ark Innovation ETF, with $6.6 billion in assets, produced annualized returns of 18% for the last 12 months, negative 29% for the past three years, and negative 1% for five years, according to Morningstar.

That’s woeful compared to the S&P 500. It posted positive returns of 25% for one year, 8% for three years, and 14% for five years. Ark Innovation’s numbers also fall well beyond Wood's goal for annual returns of at least 15% over five years.

Fund manager buys and sells:

Her investment strategy is pretty simple. Ark ETFs usually purchase emerging-company stocks in the high-tech categories of artificial intelligence, blockchain, DNA sequencing, energy storage, and robotics. Wood maintains that companies in those categories will change the world.

Of course, these stocks are quite volatile, so the Ark funds frequently fluctuate up and down. Wood adds to and subtracts from her top names frequently.

Some of Wood’s customers apparently aren’t too happy with the results. During Ark Innovation’s rally of the past 12 months, it suffered a net investment outflow of $2 billion, according to ETF research firm VettaFi.

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