Cathie Wood owns and operates Ark Investment Services LLC, which is the world’s largest actively traded ETF. She has made her name by betting on companies that seem highly risky and speculative and are generally viewed in a negative light by other institutional and retail investors. Wood’s most profitable bet so far has been her long position in Tesla, Inc. (TSLA) since 2019, covering a period when the stock was heavily shorted.
Wood believes the disruptive electric vehicle (EV) industry has plenty of remaining upside because many countries have only just begun phasing out fossil fuel-powered vehicles in favor of EVs. Two of Wood’s recent investments in this space are in Niu Technologies (NIU) and Workhorse Group Inc. (WKHS).
Wood also has substantial exposure to the biotechnology industry based on her optimism about the prospects of gene sequencing, which has the potential to revolutionize the global healthcare industry. With the biotech industry’s research and innovation increasingly demonstrating the sector’s ability to cure critical ailments such as cancer, Wood launched Ark Genomic Revolution ETF (ARKG) to invest in budding companies, such as Beam Therapeutics, Inc. (BEAM).
Beam Therapeutics, Inc. (BEAM)
BEAM is a biotech company that develops gene medicines for the treatment of a variety of critical diseases, such as sickle cell disease, thalassemia and cancer. The company’s substantial progress in its drug pipeline development caught Wood’s eye and she has been investing heavily in the stock since October 5, 2020 and held approximately 5.75 million shares as of April 27. As one of holding in ARKG and ARKK, BEAM has a combined 0.92% weighing across all funds, translating to a combined weighting rank of #31. Ark Investment Management has a 9.33% stake in the company.
BEAM was one of the first biotech companies to capitalize on the COVID-19 crisis. The company went public on February 11, 2020. It initially planned to offer 6.30 million shares priced between $15 – $17, but increased the offering by 48%, pricing each share at $17. The IPO raised $180 million. BEAM’s shares gained 87.1% within two days of their market debut. However, in the wake of rising coronavirus cases and a country wide lockdown, the stock plummeted 59.1% to hit its all-time low of $14.80 in March 2020. The stock has gained 393.4% over the past year.
On February 23, BEAM acquired Guide Therapeutics, Inc., which manufactures non-viral gene drug delivery vehicles, for a $120 million upfront payment. The acquisition should allow BEAM’s drugs to be administered to more patients nationwide.
In January, the company raised $260 million through a direct placement offering of 2.80 million shares. The financing improved BEAM’s cash balance substantially. The proceeds are expected to fund research and development.
BEAM’s licensing revenues increased 33.3% year-over-year to $24,000 in the year ended December 31, 2020. Its cash and cash equivalents balance improved 226.3% from their year-ago value to $299.67 million, while its total assets rose 189.4% from the same period last year to $451.68 million.
However, the company has not yet launched any of its products commercially. Given its extensive expenses to develop its pipeline, BEAM has incurred substantial losses from its operations. Its net loss came in at $194.59 million, up 148.4% year-over-year. However, its loss per share declined 235.3% from the same period last year to $4.19.
A $2.15 consensus revenue estimate for its fiscal year 2021 indicates an 8,858.3% improvement year-over-year. The company’s EPS is expected to rise 30.1% in the most recent quarter, ended March 2021, and 29.4% in the current year. However, it should be noted that the company’s EPS is expected to remain negative until at least 2022.
Of the six Wall Street analysts that have rated BEAM, four rated it Buy while two rated it Hold. The stock has a 12-month $112.40 median price target, indicating a 37.8% potential upside.
Niu Technologies (NIU)
Chinese EV manufacturer NIU specializes in electric scooters, commuter electric motorcycles and related accessories. Wood holds around 2.05 million shares of NIU in her Ark Autonomous Technology & Robotics ETF, which equates to a 0.15% weighting. She has been investing in the company since August last year, resulting in a 2.68% stake in the company. NIU has a weighted rank of #113 across all Ark ETFs. NIU’s shares have declined 347.3% over the past year, and 35.2% year-to-date.
The company’s gradual expansion to the United States and European markets have made the stock an ideal match for Wood’s Ark. NIU launched its first ever electric kick scooter on April 7 in China and expects to sell them in Western countries by this summer. This is expected to scale NIU’s e-scooter sales in international markets in the coming months, which declined 14.5% year-over-year in the fiscal first quarter ended March 31.
NIU managed to strengthen its presence in the Chinese markets in the previous quarter. Its e-scooter sales in the country rose 272.6% from the same period last year to 144,654 vehicles in the first quarter. NIU’s EPS is expected to climb 200% from the prior year quarter to $0.04 in this quarter. The Street expects the company’s revenues to improve 137.4% from their year-ago value to $79.03 million.
NIU’s revenues have increased 25.3% year-over-year to RMB672 million in the fourth quarter ended December 31, 2020. Its adjusted net income rose marginally from the prior year quarter to RMB68.60 million.
All four Wall Street analysts that have rated NIU rated it Buy. They expect the stock to hit $45.63 soon, indicating a potential upside of 20.3%.
Workhorse Group Inc. (WKHS)
Drone integrated electric vehicle manufacturers have been a part of Wood’s ARKK and ARKQ for some time. Wood held 4.74 million shares of WKHS as of April 27, equating to a combined 1.185% weighting. She has bought 814,524 shares so far in April. WKHS has a #20 weighted rank in ARKQ, and a combined #16 rank across all funds. Wood has a 3.73% stake in WKHS. The stock has gained 432.8% over the past year.
In February, WKHS placed a bid in USPS’ service awards contract to launch a multi-billion dollar modernized postal delivery fleet. In March, the company met with USPS to discuss specifics of the selection process. In this regard, WKHS CEO Duane Hughes said, “Meeting with the USPS marked the first step in what we expect may be a prolonged process to explore our options and possibly pursue further action related to our NGDV bid.”
On February 1, WKHSA launched a purpose-built national campaign event with C-1000 all-electric trucks in collaboration with Pritchard companies. This event highlighted the benefits of an all-electric truck to the broader market.
In January, the company received a purchase order of 6,320 all-electric delivery vehicles from Pride Group Enterprises. The company had a backlog of 8,000 vehicles as of March1, combining all purchase orders received. To scale its operations as the backlog rises, WKHS raised $270 million in capital through several financings to meet research and product development and manufacturing expenses.
WKHS’s revenues came in at $652,000 for the fourth quarter ended December 31, representing a substantial rise year-over-year. Its other income increased 1,939.2% from the same period last year to $322.20 million. Its net income increased significantly from the year-ago value to $280.50 million over this period.
However, the company is currently facing multiple class action lawsuits over alleged securities fraud. As a result, WKHS stock declined 34.3% year-to-date.
Analysts expect WKHS’ EPS to rise 90.3% year-over-year in the about-to-be-reported quarter, ended March 31, and 75.9% in its fiscal year 2022. A $2.61 million consensus revenue estimate for its fiscal first quarter indicates a 3,007.1% rise from the same period last year.
Of the seven Wall Street analysts that have rated WKHS, four rated it Buy and three rated it hold. The stock’s 12-month median price target of $21.20 represents a 63.1% potential upside.
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BEAM shares were trading at $82.37 per share on Wednesday afternoon, up $0.81 (+0.99%). Year-to-date, BEAM has gained 0.89%, versus a 12.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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