We recently compiled a list of the ARK Invest Stock Portfolio: Top 10 Stock Picks for 2024. In this article, we are going to take a look at where Roblox Corporation (NYSE:RBLX) stands against ARK Invest’s top stock picks for 2024.
ARK Investment Management LLC, more commonly known as ARK Invest, is an American investment management firm headquartered in St. Petersburg, Florida, that oversees several actively managed ETFs. It was registered in 2014 by Catherine Wood, who is known for making big bets on disruptive technology like self-driving carse and genomics. The investment fund has around $6.7 billion in assets under management.
READ ALSO: Cathie Wood’s 11 Favorite AI Stocks and Jim Cramer November Portfolio: Top 10 Stocks.
Wood’s flagship fund has faced pressures for the third straight year, with outflows at nearly $1.8 billion during the first six months of 2024, which was close to triple the outflows seen in 2023. Its closing price of $57.85 on November 11 was down 60% from the highs of early 2021. In a letter posted to investors in July, she acknowledged that the fund’s performance was challenged by certain stock picks and the overall macroeconomic environment, but added that ‘our conviction in and commitment to investing in disruptive innovation have not wavered’.
The ARK Invest CEO argued that the fund’s holdings were set to benefit once the Fed rate cuts begin and that she anticipates another period of strong returns, reminiscent of the gains witnessed during the initial days of the pandemic. In August this year, in the hope of buying the dip, Wood piled into several tech stocks whose shares had tumbled in the months prior. Since the announcement of interest rate cuts in September, ARK’s flagship ETF has grown 25%, with a major upward spike in the week running up to and following the presidential elections, which Donald Trump won on November 5.
In a post-election message released to investors, Wood likened the country’s current economic situation to the Reagan era in the early 1980s, when the interest rate and tax cuts resulted in robust economic growth, eventually helping the United States grow out of deficit and into a surplus in the Clinton era.
Cathie Wood predicts a bright future and has stated that Trump’s policies will ‘turbocharge’ the American economy more powerfully than the Reagan Revolution did. She expects the newly elected president to slash regulations and cut tax rates, as he did during his first term.
Trump during his election campaign vowed to reduce the corporate tax rate to 15%, after having already cut the rate from 35% to 21% in his presidency between 2017 and 2021. Having said that, Wood believes that businesses will put investments on hold until the promised cuts are delivered, which means the positive anticipated impact on the economy will be delayed.
Methodology
We scanned the ARK Investment Management portfolio, as of September 30, 2024, and picked the top 10 stocks according to their stake value. The figures were sourced from the Insider Monkey Database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A person taking lessons through Roblox Education, expanding their knowledge and skills.
Roblox Corporation (NYSE:RBLX)
Stake Value as of Q3 2024: $524,100,790
Roblox Corporation (NYSE:RBLX) is an American company, headquartered in Menlo Park, California, that provides users with an immersive platform for connection and communication. It is the developer of Roblox, an online gaming platform and game creation system, that allows users to play games created by them and other users.
The gaming platform offers free access to millions of games and generates revenue through in-game purchases. Its virtual currency, Robux, facilitates these purchases. The currency has helped the company attract gamers and developers to the platform, as they can convert Robux into real money.
Roblox Corporation (NYSE:RBLX) posted stellar results for Q3 on October 31, with revenue posted at $919 million, growing 29% from last year, and above the guidance provided at the end of Q2 of between $860 million and $885 million. The sale of virtual currency was reported at $1.13 billion, beating estimates of between $1 billion and $1.025 billion. DAUs for the quarter reached a record 88.9 million, growing 27% year-over-year with noticeable growth across all regions, most notably in Japan and India.
Roblox Corporation (NYSE:RBLX) now expects full-year bookings to be between $4.34 billion and $4.37 billion, up from initial projections of between $4.18 billion and $4.23 billion. With the gaming industry booming and set to grow further over the coming years, the general outlook for the stock is encouraging. According to the World Economic Forum, the gaming industry was valued at $235.7 billion in 2022 and is expected to cross the $321 billion mark by 2026.
Wall Street analysts have a consensus BUY rating on the stock, with a median share price upside potential of 6%. It is among the top picks from the ARK Invest stock portfolio, representing 4.79% of the asset management company’s investments.
Overall RBLX ranks 4th among the ARK Invest’s top Stock Picks for 2024. While we acknowledge the potential of RBLX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RBLX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.