In this article, we discuss 5 tech stocks that Cathie Wood is giving up on. If you want to see more stocks in this list, click Cathie Wood is Giving Up on These 9 Tech Stocks.
5. Okta, Inc. (NASDAQ:OKTA)
Number of Hedge Fund Holders: 46
Percentage Decline in the Stake: 61%
Okta, Inc. (NASDAQ:OKTA) is headquartered in San Francisco, California, offering cloud-based identity solutions. The company provides Okta Identity Cloud, which offers a suite of products and services such as Universal Directory, Adaptive Multi-Factor Authentication, Lifecycle Management, API Access Management, Access Gateway, Advanced Server Access, and Universal Login. Cathie Wood dumped 61% of her previously held Okta, Inc. (NASDAQ:OKTA) stake in the second quarter of 2022. The ARK portfolio had 83,316 shares of the company at the end of June, worth about $7 million.
On July 19, Bernstein analyst Peter Weed initiated coverage of Okta, Inc. (NASDAQ:OKTA) with a Market Perform rating and a $94 price target. The analyst observed that Okta, Inc. (NASDAQ:OKTA) has been an “exciting” near 40% organic growth story before, during, and after the pandemic. The analyst added that this organic growth was achieved before the swift growth driven by the company’s acquisition of Auth0.
According to Insider Monkey’s data, 46 hedge funds were bullish on Okta, Inc. (NASDAQ:OKTA) at the end of Q1 2022, down from 52 funds in the prior quarter. Christopher Lyle’s SCGE Management is the leading stakeholder of the company, with 1.78 million shares worth about $270 million.
Here is what Lakehouse Capital has to say about Okta, Inc. (NASDAQ:OKTA) in its Q2 2021 investor letter:
“The Fund held 20 positions as of the end of June and exited four during the year (including) Okta. The companies we exited were sold almost entirely on the basis of their valuations getting stretched well past their norms and to levels where the return profile no longer offered the asymmetric upside that led us to invest in the first place. We dislike selling on valuation as great growth companies are hard to find and letting winners run is an important facet of a winning growth strategy, however, we’re not gluttons for punishment either and in each of those cases we redeployed capital towards other high-quality growth companies with less demanding valuations.”
4. Baidu, Inc. (NASDAQ:BIDU)
Number of Hedge Fund Holders: 47
Percentage Decline in the Stake: 100%
Baidu, Inc. (NASDAQ:BIDU) is a Chinese company that provides internet search services, operating through Baidu Core and iQIYI segments. Cathie Wood first invested in Baidu, Inc. (NASDAQ:BIDU) back in Q4 2016, and she has been mostly consistent with her position over the years. However, in the second quarter of 2022, Wood dumped her stake almost entirely. Her hedge fund, which owned 177,142 Baidu, Inc. (NASDAQ:BIDU) shares in Q1 2022, now holds only 100 shares of the company worth $14,000.
On July 19, Daiwa analyst John Choi lowered the price target on Baidu, Inc. (NASDAQ:BIDU) to $210 from $215 and maintained a Buy rating on the shares. The analyst estimated that Baidu, Inc. (NASDAQ:BIDU)’s primary revenue will shrink by 4.8% year-over-year in Q2. However, the company’s cloud business should “demonstrate resilient growth, despite project delays,” the analyst told investors.
Among the hedge funds tracked by Insider Monkey, 47 funds were bullish on Baidu, Inc. (NASDAQ:BIDU) at the end of March 2022, up from 38 funds in the last quarter. In Q1 2022, John W. Rogers’ Ariel Investments held the biggest stake in the company, comprising 2.6 million shares worth over $349 million.
Here is what Horos Asset Management has to say about Baidu, Inc. (NASDAQ:BIDU) in its Q1 2022 investor letter:
“Although the initial reaction of the Chinese government was passive, it seems that the blacklist published by the SEC, which already includes companies as important as the technology giant Baidu, has shaken things up. Thus, at the beginning of April the CSRC (China Securities Regulatory Commission) announced possible changes in its regulation that would allow this inspection by foreign auditors, provided that the companies previously communicate to this body the state secrets that would be exposed, as well as the sensitive information that they might have to hand over, and the subsequent audit is carried out in a framework of collaboration with the CSRC. In short, a move in the direction desired by the SEC, although still far from the optimal result, that is, unrestricted access to information.
While these negotiations between the two regulatory bodies are progressing, Chinese companies have to decide how best to preserve their interests. In this regard, some companies are already listed on the Hong Kong stock exchange, as is the case of the three major technology companies (Alibaba Group, Tencent Holdings and Baidu).”
3. Spotify Technology S.A. (NYSE:SPOT)
Number of Hedge Fund Holders: 49
Percentage Decline in the Stake: 54%
Spotify Technology S.A. (NYSE:SPOT) provides audio streaming services worldwide. In the second quarter of 2022, Cathie Wood’s hedge fund slashed its Spotify Technology S.A. (NYSE:SPOT) stake by 54%. The ARK portfolio had a $230.43 million position in the company at the end of June, down from $662.7 million in the last quarter. Cathie Wood has consistently held on to her Spotify Technology S.A. (NYSE:SPOT) stake since Q2 2018.
Evercore ISI analyst Mark Mahaney lowered the price target on Spotify Technology S.A. (NYSE:SPOT) on July 7 to $230 from $235 and reiterated an Outperform rating on the stock as he “materially” slashed estimates across his large cap Internet coverage to factor in the high-cost inflationary backdrop, “fierce” forex headwinds, rising signs of weak consumer demand, and recession risk.
According to Insider Monkey’s data, 49 hedge funds were bullish on Spotify Technology S.A. (NYSE:SPOT) at the end of March, down from 53 funds in the prior quarter. Gabriel Plotkin’s Melvin Capital Management is a notable shareholder of the company, with 1.5 million shares worth $233.2 million.
Here is what Diamond Hill International Fund Concentrated Fund has to say about Spotify Technology S.A. (NYSE:SPOT) in its Q1 2022 investor letter:
“Spotify’s stock sold off in Q1 despite strong fundamental results. We believe the sell-off was due to several exogenous factors, including the interest rate policy shift, public backlash over Joe Rogan content, as well as continued skepticism by some around the company’s decision to step up growth investments again, thus calling into question the business’s longer-term ability to scale. We used the period of weakness to add to our position.”
2. Twitter, Inc. (NYSE:TWTR)
Number of Hedge Fund Holders: 68
Percentage Decline in the Stake: 100%
Twitter, Inc. (NYSE:TWTR) has been featured on the Cathie Wood portfolio since Q4 2016, with minor breaks over the years. ARK Investment Management lowered its Twitter, Inc. (NYSE:TWTR) stake from 1.3 million shares in Q1 2022 to just 1,804 shares in the second quarter of 2022, dumping almost 100% of its position.
Truist analyst Youssef Squali lowered the price target on Twitter, Inc. (NYSE:TWTR) to $43 from $50 and maintained a Hold rating on the shares on July 19 as part of a broader research note on Digital Advertising Platforms. The analyst said that his downward estimate revisions were a result of a challenging macro environment, foreign exchange headwinds, the Russia/Ukraine war, difficult comps, and the disruptive nature of Musk’s takeover. The analyst observed that if Twitter, Inc. (NYSE:TWTR)’s deal with Musk falls through, the shares could trade in the high $20s.
According to Insider Monkey’s data, 68 hedge funds were bullish on Twitter, Inc. (NYSE:TWTR) at the end of Q1 2022, down from 83 funds in the last quarter. Paul Singer’s Elliott Management is the largest position holder in the company, with 10 million shares valued at approximately $387 million.
Investment firm ClearBridge Investments discussed the prospects of Twitter, Inc. (NYSE:TWTR) in its Q4 2021 investor letter. Here’s what the fund said:
“Weakness among our holdings in the communication services sector was the other detractor to performance. Twitter shares sold off following weaker than expected third-quarter results, but under new leadership, we see the potential for improved execution and performance as live events and entertainment return to pre-pandemic levels.”
1. Sea Limited (NYSE:SE)
Number of Hedge Fund Holders: 77
Percentage Decline in the Stake: 67%
Sea Limited (NYSE:SE) specializes in the digital entertainment, e-commerce, and digital financial services businesses. Cathie Wood slashed her position in Sea Limited (NYSE:SE) by 67% in Q2 2022. Her hedge fund held 2.6 million shares of the company in Q1 2022, which declined to 868,561 shares in the June quarter.
On July 15, Stifel analyst Scott Devitt lowered the price target on Sea Limited (NYSE:SE) to $105 from $115 and kept a Buy rating on the shares ahead of the company’s Q2 earnings. Although he left estimates for Q2 unchanged, he “moderately” trimmed his second half estimates as a result of ongoing macro uncertainty and recent headwinds from the strengthened U.S. dollar, the analyst told investors.
Hedge fund sentiment declined around Sea Limited (NYSE:SE) at the end of March 2022. The number of long hedge fund positions declined to 77 from 108 in the earlier quarter. Chase Coleman’s Tiger Global Management is the leading position holder in the company, with 13.5 million shares worth $1.6 billion.
Here is what Baron New Asia Fund has to say about Sea Limited (NYSE:SE) in its Q1 2022 investor letter:
“Sea Limited, a global digital gaming and e-commerce company, detracted from performance for the period held. Similar to other online consumer businesses, Sea faced significant multiple compression in the quarter, exacerbated by a slowdown in user growth at its key Free Fire digital game and mounting investments in its e-commerce operation, particularly in new markets like Brazil. We exited our position as we lost confidence in the long- term unit economics in some of Sea’s new markets and were concerned by the simultaneous slowdown in revenue growth and increase in underlying cash burn.”
You can also take a look at 10 Stocks to Watch as Cathie Wood’s Fund Starts to Rebound and 10 Small-Cap Growth Stocks in Cathie Wood’s Portfolio.
