Cathie Wood, the CEO of Ark Invest, has recently increased her holdings in Tesla and CrowdStrike, two of her favored tech stocks, following their recent price declines.
TakeAway Points:
- Cathie Wood’s Ark Invest purchased 33,143 Tesla shares, with the goal of seeing the price reach $2,600 by 2029, after a 12% decline.
- In the midst of a significant IT disaster that resulted in a 23% stock decline and $19.4 billion in lost value, Ark Invest also purchased 58,814 CrowdStrike shares.
- Wood is still committed to disruptive innovation and has optimistic long-term outlooks for Tesla and CrowdStrike, despite setbacks for both businesses.
Cathie Wood’s buys more shares
On Wednesday, Wood added 33,143 shares of Tesla to the ARK Next Generation Internet ETF (ARKW) after the electric vehicle company reported second-quarter earnings that fell short of expectations, causing a 12% drop in its stock price. Wood, a long-time Tesla supporter, has a bullish outlook on the company, projecting its stock to reach $2,600 by 2029, which would value Tesla at over $8 trillion. This optimistic forecast is largely based on Tesla’s potential in the robotaxi market, which Wood believes could account for more than half of the company’s value by 2026.
In addition to Tesla, Wood also purchased shares of CrowdStrike, a cybersecurity software company, amid a significant global outage that affected millions of Microsoft Windows devices. Ark Invest acquired 38,595 shares of CrowdStrike on Friday and an additional 20,219 shares on Monday. The stock had plummeted due to a defective update to its Falcon vulnerability-protection software, which caused widespread disruptions, including grounded flights and canceled medical appointments. Despite these setbacks, Wood remains committed to her investment strategy focused on disruptive innovation.
Tesla’s Earnings Miss
Tesla’s stock experienced a significant drop of over 8% in premarket trading following the release of its second-quarter earnings, which did not meet market expectations. The company’s automotive revenue decreased by 7% year-over-year to $19.9 billion, and its adjusted earnings margin also saw a decline. Tesla has been compelled to reduce prices and offer discounts globally due to slowing sales and increasing competition, particularly in China, a crucial market for the company. As of now, Tesla’s shares are down nearly 1% for the year, while the S&P 500 has risen by more than 16%.
Despite these challenges, Tesla remains the leading seller of electric vehicles in the U.S., although it is losing market share to competitors. The market is closely watching for new developments, including the introduction of a new mass-market car, which CEO Elon Musk has promised to deliver in the first half of next year. Musk also emphasized the potential of robotaxis during the earnings call, envisioning a future where Tesla vehicles could be used in an autonomous ride-hailing service. He stated, “I would be shocked if we cannot do it next year,” although he has a history of not always meeting his timelines.
CrowdStrike’s IT Meltdown
CrowdStrike has faced a challenging week following one of the most significant IT meltdowns in history. The company’s stock has dropped by 23% since the incident, erasing $19.4 billion in shareholder value. The outage, caused by a faulty update to its Falcon software, affected 8.5 million Windows computers, leading to widespread disruptions in various sectors, including airlines, hospitals, and banks. Delta Air Lines alone is estimated to have lost $163 million in the first three days of the crisis.
CrowdStrike has issued an apology and acknowledged weaknesses in its procedures, stating that the update was not fully tested. The company plans to implement staggered rollouts and additional validation tests in the future. Despite these efforts, the incident has significantly impacted CrowdStrike’s reputation, and many of its 29,000 customers are still dealing with the fallout. Analysts have highlighted the potential for further stock declines and the possibility of customers switching to other security vendors.
