Cathie Wood has cooled her buying activity in recent days. The co-founder and CEO of Ark Invest lightened a few positions on Monday, but she didn’t add to a single stake. It’s rare for her not to make any additions, but she was light on the trigger finger last week, too. She only bought shares of one company in two of the final three trading days of last week.
Ask Invest bought into just three stocks on Tuesday. Wood added to her stakes in Palantir Technologies (NYSE: PLTR), Datadog (NASDAQ: DDOG), and Rocket Lab USA (NASDAQ: RKLB) on Tuesday. Let’s take a closer look at her three latest purchases.
1. Palantir
The good news is that shares of Palantir have more than tripled since the start of last year. The bad news for recent investors is that the stock had more than quadrupled when it peaked two months ago. The software developer for the intelligence community took a big step down on Monday, after posting poorly received financial results.
Revenue rose 21% to $634 million in the first quarter, just ahead of analyst expectations. Palantir also cranked out its sixth consecutive quarter of reported profitability. The $0.08 a share in net income was in line with Wall Street profit’s target. Yet the stock plummeted 15% on Monday. That may seem extreme for largely in-line performance, but guidance left a lot to be desired.
Nothing can sink an otherwise acceptable quarter like a problematic outlook. Palantir is bracing investors for $649 million to $653 million in revenue for the current quarter and $2.677 billion to $2.689 billion for all of 2024, and the problem is that analysts estimates were perched above even the high end of both of those ranges. A stock that has roughly quadrupled in the previous 16 months can’t afford to fall short.
At least five analysts raised their price targets on Palantir this week immediately following the report. You don’t often see that on a day when a stock tumbles 15%, but it’s also a testament to how far shares of the big data analytics specialists have come since its previous financial update.
One of the analyst moves wasn’t very flattering. RBC Capital boosted its price target from $5 to $9, but the stock would have to shed more than half of its value to hit the new price goal. Wood naturally sees an opportunity here. With Palantir’s commercial revenue growing at more than double the pace of its flagship government contract business, it’s a growth channel worth watching as it becomes a larger part of the business.
2. Datadog
Another company that put shareholders through a double-digit percentage hit after announcing fresh financials on Monday was Datadog, the cloud-based platform for delivering an enterprise with early downtime reports and other analytic essentials. Datadog trounced expectations on both ends of the income statement. And unlike Palantir, Datadog offered up rosy guidance. Yet the shares still took an 11% hit.
The three analysts who chimed in following Datadog’s performance seem to agree with the market’s reaction. They all lowered their price targets on the stock. The common thread is that the analysts expected more after similar companies performed a lot better earlier this earnings season.
Some metrics didn’t impress. Datadog’s net dollar-based retention rate has declined over the past four quarters. It’s now roughly 115%, down sharply from greater than 130% a year earlier. The percentage of customers on the platform using at least two Datadog products also declined to 82% from 83% three months earlier. The report may have seemed strong on the surface, but for a stock with a premium valuation, investors got nervous.
3. Rocket Lab USA
Another company that didn’t take off after announcing quarterly results this week was Rocket Lab USA, but unlike Palantir and Datadog these shares suffered only a 2% move lower on Tuesday. The provider of space launch services and other out-of-this-world solutions saw its revenue skyrocket 69%, but that was just below expectations. It did come through with a narrower loss than analysts were modeling.
Rocket Lab’s business is growing. Unlike many space exploration companies that are largely pre-revenue, Rocket Lab expects to generate $105 million to $110 million in the new quarter from its space systems and launch services. Some analysts think Rocket Lab will turn profitable next year. With an order backlog north of $1 billion and its market cap down below $2 billion, this could be one of the more reasonable valuations in the space race. Wood seems to think so, hopping on for a ride on the shares on Tuesday.
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Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Datadog and Palantir Technologies. The Motley Fool recommends Rocket Lab USA. The Motley Fool has a disclosure policy.
Cathie Wood Goes Bargain Hunting: 3 Stocks She Just Bought was originally published by The Motley Fool
