What goes up seems to come down, rather easily and quickly. This, unfortunately, seems to apply to Cathie Wood’s immensely popular ARK Innovation ETF (ARKK).
To say that the ARK Innovation ETF (ARKK) is having a poor 2022 thus far would be a gross understatement. Within a month in 2022, the ARK Innovation ETF is down about 29%. Over the last 12 months, the ETF is down by about 50%.
In fact, its current trading price of US$68.91 as of 28 January 2022 is just slightly above its pre-pandemic of $58.61 as of 21 February 2020, or an increase of about 17%.
In the same period, the S&P 500 is up about 32% while Warren Buffett’s Berkshire Hathaway, which had been seen in the past couple of years as being light on tech and as such, was lagging behind the index, is up by about 36% since 21 February 2020.
As an ETF that invests in some of the leading technology companies in the world, the ARK Innovation ETF reflects the performances of the components within its ETF. In this article, we look at some of the biggest holdings that the ETF has, and the huge share price decline sustained by these companies thus far in January 2022.
Tesla (NASDAQ: TSLA)
Since the start of the year, Tesla (NASDAQ: TSLA) share price is down by about 29%. It’s currently trading at US$846.35 after starting the year at US$1199.78.
Yet, earlier this week, on 26 January 2022, Tesla reported strong earnings for the quarter and 2021 during its 4Q2021 results announcement. The company announced a record US$15.9 billion in automotive revenue for 4Q2021. Total revenue for 2021 is US$53.8 billion, up from US$31.5 billion in 2020. Net profit for 2021 is US$5.5 billion, up from US$721 million in 2020. The results are impressive, but as with Tesla’s share price most of the time, it’s the future which is what investors are more interested in.
The ARK Innovation ETF currently has an 8.07% weightage in Tesla, the highest among any stocks.
Zoom (NASDAQ: ZM)
Zoom (NASDAQ: ZM) share price is currently trading at US$143.81, down about 22% in 2022 thus far and about 61% over the past 12 months.
Due to the pandemic, Zoom became a software that many people started using for work-from-home, leading to an exceptional increase in share price from $101.76 (21 February 2020) to US$559 (16 October 2020).
The increase in Zoom’s share price was well reflected in the company’s performance. During their 4Q2020 results announcement on 4 March 2020 (so this was a pre-pandemic result), revenue for the quarter was at US$188 million, while its operating income was US$10.6 million. In its latest 3Q2022 results announcement on 22 May 2021, the company recorded a revenue of US$1.05 billion with an operating income of $290 million.
Yet, there are worries that growth may have slowed as the pandemic becomes part of the new normal. Revenue for 3Q2022 (US$1.05 billion) did not increase by much compared to the quarter before (US$1.02 billion) while operating income remains flat.
The ARK Innovation ETF currently has an 6.51% weightage in Zoom, the second highest within the ETF.
Roku (NASDAQ: ROKU)
Roku (NASDAQ: ROKU) is a company that provides hardware that allows users to stream content to their television. As people start moving away from traditional free-to-air and cable tv networks, and to streaming TV, Roku devices enable people to watch video content, paid and free, on their TV.
Since the start of the year, Roku’s share price has declined by about 35% to US$151.23. In the past 12 months, it has declined by about 61%. It’s currently trading at a price level not seen since September 2020. Prior to the pandemic, its share price was at US$119.38 on 21 February 2020.
The ARK Innovation ETF currently has an 6.43% weightage in Roku.
Coinbase (NASDAQ: COIN)
Coinbase (NASDAQ: COIN) was listed on the NASDAQ on 14 April 2021, becoming the first public-listed company that is a pure-play cryptocurrency player. At a price of US$328.28 then, Coinbase held a market valuation of about US$85.8 billion.
Since then, however, its share price has not done well. While it was largely trading at the US$200+ range after its listing, it has fallen to US$177.58 as of 28 January 2022, down about 45% from its listing price. Since the start of 2022, Coinbase’s share price is down about 29%.
Most notably, in its 3Q2021 results announcement on 9 November 2021, monthly transacting users were down to 7.4 million from 8.8 million the quarter before. Net revenue was at US$1.24 billion, down from US$2.0 billion the quarter before. Adjusted EBITDA was at US$618 million, compared to US$1.15 billion the quarter before.
As written in our analysis during their IPO, Coinbase’s performance is closely tied to the performance of cryptocurrencies such as Bitcoin and Ethereum. This is because a bulk of their revenue is derived from transaction fees earned from the trades on their platform. In other words, when Bitcoin and Ethereum prices go up, Coinbase revenue will increase – with all other things remaining the same. The opposite effect applies as well.
The ARK Innovation ETF currently has an 5.15% weightage in Coinbase.
Read Also: ARK ETFs: What Are They And How You Can Invest In The Biggest Disruption Trends Globally
4 Stocks This Week is not a recommendation from us to buy or sell any of these stocks. For investors who are keen to find out more, you should continue researching about them before making your investment decisions.
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