The growth investor did a lot of shopping on Monday.
Cathie Wood is on a roll this year. The CEO, co-founder, and primary investor at Ark Invest isn’t going to play it safe to lock in her market-thumping gains in 2025. She’s off to a busy start this week, already adding to some of her existing holdings.
Ark bought more shares of Advanced Micro Devices (AMD -2.56%), Ibotta (IBTA 2.77%), and Nu Holdings (NU -0.12%) on Monday. Let’s take a closer look at Wood’s latest transactions.
1. Advanced Micro Devices
It took time, but the market is now fully on board with AMD as a play on the booming artificial intelligence (AI) revolution. The same maker of microprocessors and graphics processing units (GPUs) that saw its shares slide nearly 20% in 2024 has now more than doubled since bottoming out three months ago.
Despite the recent surge, Wall Street pros are still warming up to AMD’s growth potential. Stacy Rosgan at Bernstein Research boosted his price target on the shares from $95 to $140 on Monday. This is actually less than where the stock is right now. He’s sticking to his earlier market perform rating. However, he is boosting his near-term projections on the ascending company. Momentum and the resumption of the sale of AI chips to China in the second half of this year are raising the floor for AMD.
Image source: Getty Images.
Revenue gains have dramatically accelerated for four consecutive quarters. Growing demand for data centers to crank out the resource-intensive generative AI has fueled the top-line pop at AMD. AMD has been in the right place at the right time before in the PC and gaming revolutions. This time the ceiling could be even higher. Here is how the last five quarterly updates have played out for AMD in terms of revenue growth.
- Q1 2024: 2%
- Q2 2024: 9%
- Q3 2024: 18%
- Q4 2024: 24%
- Q1 2025: 36%
Its data center segment saw its revenue post a 57% year-over-year increase in the first quarter of this year. It now accounts for half of its business. This business was just 42% of AMD’s revenue mix a year earlier. It also helps that AMD’s gaming business has bounced back after a rough 2024, but don’t lose sight of the momentum with data centers hungry for its hardware. The greater the share of its top line coming from this segment, the stronger the overall results will be if it can continue cranking out healthy growth with its chips.
The irony here is that analyst profit targets have been moving lower in the last three months, even as the shares have rallied. The obstacle is the impact of export trade restrictions into China, but optimism is turning as trade war negotiations continue. AMD may seem cheap at 27 times next year’s projected earnings, but with profit outlooks likely to brighten as the next few quarters play out the future could be as bright as the stock chart has been over the last couple of months. AMD reports second-quarter results in two weeks. It’s going to be on the move, and Wood buying now suggests that she believes the shares will be higher after the report.
2. Ibotta
Let’s turn from accelerating growth to a company going in the other direction. Ibotta seemed to go public at a great time last year. The company behind a digital marketing platform that rewards users with cash-back rewards for making in-store or online purchases through ad-sponsored deals saw its revenue soar 52% in 2023. Last year’s springtime initial public offering (IPO) was priced at $88, popping to an open of $117 for its market debut. Ibotta stock closed at $38.75 on Monday, less than half of its IPO price and less than a third of its peak last April.
The stock price has fallen alongside Ibotta’s growth. Last year’s revenue increase decelerated to 15%, and recent results have been even worse. Ibotta’s top line declined 1% in the fourth quarter of last year, rising less than 3% in the first quarter of this year. Guidance for the second quarter that it will announce next month wasn’t any better. In May, Ibotta was eyeing just 2% in revenue growth on another double-digit decline in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
Ibotta’s transition from its original direct-to-consumer business to reach a larger audience with a less lucrative third-party approach is going through growing pains. These aches might not last. Sitting through back-to-back quarters of Ibotta falling short of market expectations isn’t pretty, and the next financial update should also be a dud. However, analysts see a return to double-digit revenue and earnings growth in 2026. Sometimes you have to shop now for the future.
3. Nu Holdings
Growth is also slowing at Latin American fintech stock Nu Holdings, and the shares are down slightly over the past year. It doesn’t mean the company behind Brazil’s digital Nubank isn’t growing. Revenue rose 19% in its latest quarter, fueled by a similar 19% jump in accounts. Nubank was serving 118.6 million customers at the end of March, including 59% of its home country’s adult population. It’s a stunning achievement for a platform that launched just 11 years ago. The branchless bank also has operations in Mexico and Brazil.
The model works. Monthly average revenue per active customer is clocking in at $11.20, but it only costs Nu $0.70 a month to service an account. The business is naturally profitable, and the bottom line is growing faster than the top line. Adjusted net income rose 27% in its latest quarter. Nu stock is trading for less than 17 times next year’s estimated earnings. This is a premium to slower growing traditional banking outfits, but a discount given its strong growth rate.
Rick Munarriz has positions in Nu Holdings. The Motley Fool has positions in and recommends Advanced Micro Devices and Ibotta. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.
