The billionaire investors stand in a league of their own. It’s not necessarily their wealth that puts them there – rather, it’s their success in the markets, in establishing themselves at the highest level of the financial world, that built their wealth. Cathie Wood, the founder and CEO of $75 billion asset manager Ark Invest, is one of Wall Street’s most influential investors due to her stock-picking power and her company’s impressive returns.
Looking at the current market situation, Wood believes that “as long as we don’t fall into recession,” stocks are poised for “a long bull market.” It’s an interesting forecast, given that we’re currently at the top of such a long bullish trend; the S&P 500, at 4,700, stands at near all-time high. But when top investors, especially investors with Wood’s long-term level of success, talk, the market listens.
Looking to Wood for investing inspiration, we used TipRanks’ database to find out if three stocks the investing guru recently added to her fund represent compelling plays. According to the platform, the analyst community believes they do, with all of the picks earning “Strong Buy” consensus ratings. Let’s jump right in.
We’ll start with WalkMe, one of the high-tech world’s unicorn companies. WalkMe is currently valued at $1.8 billion, and holds a niche in the SaaS segment. The company offers a code-free digital adoption platform (DAP) that provides users with in-software instructions for web, mobile, desktop apps – in effect, WalkMe’s product walks the user through the app. The company boasts that it improves sales and conversion rates, reduces the costs of support centers, and improves the end user’s experience and productivity.
WalkMe was launched back in 2012, but went public earlier this year, taking advantage of the summer’s bull market, The company put 9.25 million shares on the market, and raised $287 million.
Earlier this month, WalkMe released its 3Q21 report, its’s second such release as a public entity. The company reported $46.1 million at the top line, up 37% yoy, and the non-GAAP net loss per share moderated sequentially from 16 cents to 13 cents. The company finished the quarter with a negative free cash flow of $12.9 million, but still counted $361.9 million in liquid assets on hand.
Cathie Wood is clearly bullish on this unicorn’s forward prospects; her fund acquired a new position in WalkMe in Q3, snapping up 118,336 shares. At current valuation, these are now worth $2.62 million.
5-star analyst Patrick Walravens, of JMP Securities, also likes what he’s seeing. The analyst rates WKME an Outperform (i.e. Buy) along with a $39 price target. The analyst, therefore, expects the stock to climb by 64% over the coming months. Should the target be met, a twelve-month gain in the shape of a whopping 76% could be in store. (To watch Walravens’ track record, click here)
Backing his stance, Walravens writes: “Overall, we see WalkMe as an attractive opportunity for long-term capital appreciation for several reasons, including… its digital adoption platform makes software easier to use and deploy, a compelling value proposition for employees and enterprises as reflected in our due diligence with nine customers, 89% of which expect to increase their spending on WalkMe over the next 12 to 18 months… the company addresses a TAM that it estimates could be as big as $34B… [and] accelerating growth as the company comes back from the pandemic, shifts increasingly upmarket, and begins seeing the benefits of sales & marketing investments that re-started in 4Q20.”
Wall Street generally remains impressed with WalkMe and the recent stock reviewers have published 5 positive notes on the company, backing up a Strong Buy consensus rating. Shares in WKME are trading for $22 and have ~67% upside potential based on a $36.80 average price target. (See WKME stock analysis on TipRanks)
Cognyte Software (CGNT)
Next on our list of Wood’s picks is Cognyte Software, a spin-off company that started trading independently back in February of this year. At that time, it was spun off from Verint, to handle the parent company’s defense-related intelligence and cyber activities. Since then, Cognyte has taken on the challenge of providing high-end solutions for cyber security threats and data protection.
Cognyte’s revenues have slipped slightly since it started its independent existence. The company reported $124 million at the top line in its April fiscal 4Q21 report, and its most recent quarterly report, released in September, showed $115.9 million at the top line. Even though the revenues have sipped, the company’s EPS loss has moderated, from 36 cents to 17 cents. It’s important to note that the company’s fiscal 2Q22 results beat market expectations, that an increase in software-related revenues has pushed the gross margin up to 72.3% and helped increase profits by 16% in the second fiscal quarter.
So this is a cybersecurity company with a solid reputation, going through some growing pains as it turns to independent existence, and looking at sound long-term prospects. All of that drew Cathie Wood, with her known bent toward tech stocks. Reflecting a new position for the fund, Wood’s Ark Invest bought up 144,092 shares of Cognyte in Q3. The value of this holding? It lands at $3.17 million at current valuation.
Cognyte shares saw a sell-off after the September quarterly release – but at least one analyst believes that investors overdid it.
“We attribute the selloff in shares to the larger 4Q Revenue hurdle for management to achieve its full-year target. What’s important to note is that there is a shift in revenue fulfillment from 3Q to 4Q based on a few customers’ request to delay delivery of Cognyte’s software solution based on customer-readiness. It’s based on customer requests to delay – not based on Cognyte’s operations or ability to deliver. We continue to believe the post-earnings selloff and subsequent pressure on shares is overdone,” said Needham’s Mike Cikos.
These comments back up Cikos’ Buy rating, and his $36 price target suggests the stock has room for ~64% growth by this time next year. (To watch Cikos’ track record, click here)
Overall, there are 3 recent analyst reviews on CGNT shares and they all agree that this is a Buy proposition, making the Strong Buy consensus unanimous. Cognyte’s stock is selling for $22 and the $34 average price target implies ~55% one-year upside potential. (See CGNT stock analysis on TipRanks)
Innoviz Technologies (INVZ)
Last up is Innoviz, another tech stock – but this one has a much more hands-on approach. Innoviz is a producer of LiDAR systems for the automotive market. These advanced sensor systems (LiDAR stands for ‘light detection and ranging’) were originally developed for cartographic applications, allowing aircraft and satellites to create highly accurate topographic maps – but they have been adapted by automobile manufacturers as the ‘eyes’ of the cars, and are now a vital technology in the autonomous vehicle niche.
Innoviz’ products, InnovizOne and InnovizTwo, are solid-state LiDAR sensors specifically designed for automotive applications. They are rugged, light-weight, and are compatible with Level 3-5 autonomous vehicles. InnovizOne is on the market now, and InnovizTwo is scheduled for launch before year’s end. The products have market applications in a range of niches, from trucking to robotaxis to consumer vehicles, and even in industrial drones, sidewalk delivery tech, and heavy machinery.
The company reported its 3Q21 earnings on November 10, and since then the stock has started reversing its year-long decline. The quarterly report showed continued progress on key automotive programs. Importantly, InnovizTwo, which boasts higher performance than the InnovizOne, can now be provided directly to customers with Innoviz as a Tier 1 supplier. Engineering samples of InnovizTwo will be available before the end of this year. On the financial end, the company reported $2.1 million in total revenues, a modest sum that reflects the company’s ‘ramping up’ status – but the top line was up 106% from the year-ago quarter.
As for Cathie Wood, she was impressed enough by Innoviz to buy up 352,816 shares in the company in Q3. This stake has a current value of $2.36 million.
Wood isn’t the only INVZ fan. Covering the stock for investment banking firm Cantor, analyst Andres Sheppard takes up coverage of this stock with a bullish attitude.
“Management noted in Q3 call that they are in late stages negotiations with another large automobile manufacturer and competing only with one other supplier. We think landing this opportunity would result in significant upside,” Sheppard opined.
“While management appears more focused on applying their LIDAR solutions primarily to passenger vehicles, we believe the technology could also complement other applications such as radar, traffic lights, cameras, agriculture, etc. Overall, the total market opportunity continues to be quite large (Cantor previously calculated a $4B TAM…) and we continue to believe this is conservative,” the analyst added.
To this end, Sheppard puts a $9 price target here, implying a 12-month upside of 33%, along with an Overweight (i.e. Buy) rating. (To watch Sheppard’s track record, click here)
All in all, Innoviz has a unanimous Strong Buy consensus rating based on 3 positive analyst reviews. The shares are priced at $6.8 and the $10.33 average price target suggests ~52% upside from that level. (See INVZ stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.