Cathie Wood’s Ark Invest Buys $80 Million Worth Of Robinhood After Earnings Sell-Off

Forbes

Topline

Despite Robinhood facing growing skepticism from Wall Street analysts, famed stockpicker Cathie Wood of Ark Invest recently doubled down on her investment in the popular stock trading app, shares of which tumbled more than 10% on Wednesday after reporting a huge third-quarter revenue miss.

Ark Invest’s Cathie Wood is still bullish on Robinhood even after the company’s disappointing … [+] third-quarter earnings.

Patrick T. Fallon/AFP via Getty Images

Key Facts

Shares of Robinhood, which went public to much fanfare in July, are down 12%—below its IPO price of $38—since reporting lackluster third-quarter earnings late on Tuesday.

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Cathie Wood, the founder and CEO of $75 billion asset manager Ark Invest, purchased a total of 2.24 million shares of Robinhood in various funds on Wednesday, a position worth roughly $80 million at the time. 

The innovation investor is still clearly bullish on Robinhood, buying the dip in the stock despite the company’s big revenue miss, which was in large part due to a sharp drop in crypto trading on its platform, and a slowdown in user growth. 

Wood added to her position in Robinhood—she has been buying the majority of shares for her flagship fund, the ARK Innovation ETF—even as Wall Street analysts grew increasingly negative on the company following its troublesome earnings report.

Analysts across the board slashed their price targets for Robinhood on Wednesday, including those at JPMorgan, Goldman Sachs, Piper Sandler, Barclays and Deutsch Bank.

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As experts point out, investors are growing increasingly concerned that without a major market event—such as the GameStop frenzy in the first quarter or Dogecoin in the second quarter—Robinhood’s trading activity and revenue will likely continue to take a hit.

What To Watch For:

Robinhood’s earnings showed that more users left the app or sold off holdings than opened new accounts during the third-quarter, a worrying sign for a company that boasted enormous user growth in 2020 and the first half of 2021. Monthly active users dropped to 18.9 million from 21.3 million last quarter, according to Robinhood, while the number of overall funded accounts fell from 22.5 million to 22.4 million. There are certainly emerging signs that some users may be quitting the platform and moving to competitors like Fidelity of Schwab, which could account for the slowdown in account growth. In recent weeks, there have been dozens of different posts on finance Reddit forums with users posting screenshots showing that they left Robinhood for a new brokerage.

Tangent:

Though Wood has continued to build a position in Robinhood since it went public in July, the brokerage still accounts for just 1.33% of her flagship Ark Innovation ETF. 

Key Background:

Despite some skepticism from Wall Street, Wood’s strategy focuses almost exclusively on investing in “disruptive innovation.” She remains especially bullish on cryptocurrencies, she told Forbes on Wednesday, firmly believing that regulation won’t hamper the innovation that is taking place. Wood also bought the dip in Twitter stock on Wednesday, adding a position worth about $60 million, as shares of the social media company fell nearly 11% after its earnings showed a slowdown in user growth. 

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Further Reading:

Star Stockpicker Cathie Wood Dismisses Hyper Inflation Risk And Pitches Zoom And Invitae During Forbes’ 2021 Wealth Summit (Forbes)

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Author: Sergei Klebnikov, Forbes Staff


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