3 stocks that Cathie Wood believes in despite the price drop

Cathie Wood, co-founder and CEO of Ark Invest, is known for her aggressive strategy in investing in innovative and high-growth companies. Her funds focus on technology leaders and businesses that have the potential to change their industries.

Last week, Cathie Wood once again showed her willingness to buy stocks of companies that are under pressure. On Thursday, she bought shares in Roblox, Amazon and PagerDuty. Let's take a look at the reasons behind these investments.

Roblox $RBLX: A bold bet on the downside

Roblox plunged 11% on Thursday after investors were disappointed by its financial report. Although the company beat expectations in terms of revenue and profit, a key metric - bookings - grew more slowly than analysts had hoped. While revenue rose 32% year-over-year to $988 million, bookings grew only 21%, a slowdown from previous quarters.

The number of daily active users rose 19% to 85.3 million, a positive sign. However, average spend per user remained almost unchanged, which may indicate a stagnation in monetization. Critics warn that the company is still generating significant losses - an annual deficit of over $1 billion is expected. On the other hand, generating free cash flow of over $800 million suggests that Roblox has the financial strength to sustain its growth model. Cathie Wood used this opportunity to increase its positions in several Ark Invest funds.

Amazon $AMZN: Strong numbers, but uncertain future

Wood was buying Amazon stock before the release of its fourth-quarter results. In the short term, however, it wasn't a perfectly timed bet - the stock fell after the results were released. Although the company reported strong revenue growth of 10% to $187.8 billion and earnings per share beat analysts' expectations ($1.86 versus the $1.46 predicted), investors were disappointed by the weaker forecast.

Amazon expects revenue growth of between 5-9% in the first quarter, with slowing growth rates being the main concern. While AWS' cloud division continues to grow at a double-digit pace (19% YoY), the core e-commerce segment faces bigger challenges. After three years of sub-12% growth, 2025 will be a key test for Amazon. Cathie Wood seems to believe that the current stock weakness is only temporary and Amazon still has long-term growth potential.

PagerDuty $PD: An opportunity for a turnaround?

Unlike Roblox and Amazon, whose stocks have strengthened significantly over the past year, PagerDuty has lagged. Its stock is down 20% over the past year, in stark contrast to Roblox's 65% growth and Amazon's 41% growth. The company specializes in cloud-based monitoring of enterprise systems, but its growth has slowed significantly in recent years.

Since the second quarter of 2023, the revenue growth rate has steadily declined until it reached 8% in the first half of fiscal 2025. It was only in the third quarter that the trend reversed and sales began to accelerate slightly again. If PagerDuty is able to return to double-digit growth, Cathie Wood's investment could prove sound.

Disclaimer: You will find a lot of inspiration on Bulios, but stock selection and portfolio construction is up to you, so always do a thorough analysis of your own.

Source: TheMotleyFool