ARK’s Big Sell: Cathie Wood Cuts $19M in Tech Holdings Pre-Earnings

Cathie Wood

Cathie Wood, the renowned investor at the helm of Ark Investment Management, has recently made significant moves in the stock market by selling off shares of two of her favored tech companies, Roblox Corp. (RBLX) and Palantir Technologies (PLTR), just before their upcoming earnings announcements. This activity from January 28 to January 31 has caught the eye of investors and market analysts alike, considering both companies have been pivotal in the tech sector’s recent performance.

Roblox, known for its user-generated gaming platform, saw its stock value surge, reaching heights not seen since early 2022. Despite a modest 27% gain in 2024, which was slightly below the Nasdaq Composite’s (COMP) performance, Roblox’s stock has been on a solid rise in early 2025, climbing nearly 23% since January 1. The company’s third-quarter results in October 2024 were impressive, showing a revenue of $919 million, up 29% year-over-year, and bookings that soared to $1,128.5 million, marking a 34% increase. Despite these gains, Roblox reported a net loss attributable to common stockholders of $239.3 million, with a consolidated net loss of $240.4 million.

However, the adjusted EBITDA was a positive $55 million, excluding adjustments for deferred revenue and cost. User engagement was also up, with average Daily Active Users (DAUs) reaching 88.9 million, a 27% increase, and total hours engaged hitting 20.7 billion, up by nearly 30%. On the cash flow front, net cash provided by operating activities was $247.4 million, showing a 120% rise, while free cash flow increased dramatically by 266% to $218 million. Roblox’s CEO, David Baszucki, highlighted the company’s strong growth across core financial and operating metrics, attributing the success to their platform’s strength and effective growth strategies. With the anticipation of its Q4 2024 earnings release on February 6, firms like Roth MKM have been optimistic, adjusting their price targets upward to $70 from $54, suggesting expectations of strong performance despite the stock being priced for perfection.

Despite these results, Wood’s ARK Innovation ETF (ARKK) offloaded 121,696 shares of Roblox over four consecutive sessions from January 28 to January 31, totaling approximately $8.6 million.

On the other hand, Palantir Technologies has enjoyed a meteoric rise, quadrupling in value in 2024 with a 340% increase, fueled by the high demand for its AI-driven data analytics solutions. Palantir’s software has become indispensable for both government bodies in intelligence and defense sectors and for businesses looking to leverage data for operational efficiency. The company’s Q3 earnings were notably above expectations, with CEO Alex Karp highlighting an “unrelenting AI demand.” Palantir reported a revenue of $726 million, marking a 30% year-over-year increase. Net income rose to $143.5 million, or 6 cents per share, compared to $71.5 million, or 3 cents per share, in the same quarter last year. Palantir’s adjusted EBITDA surpassed $1 billion on a trailing twelve-month basis. The company saw a 44% increase in U.S. revenue, reaching $499 million, driven by strong demand for its AI Platform (AIP). Revenue from the U.S. government sector grew 40% to $320 million, and U.S. commercial revenue increased 54% to $179 million. Following the earnings report, Palantir’s shares surged 20%, and the company was added to the S&P 500 index (SPX).

However, despite these solid results, Wood has been steadily divesting from Palantir. On Jan. 30, the ARK Innovation ETF sold 127,969 Palantir shares valued at approximately $10.4 million. This divestment follows a pattern as Wood has been dumping her Palantir shares in the past few months. On Jan. 13, she sold 140,518 shares worth approximately $9.1 million. Between Jan. 3 and Jan. 7, she unloaded 221,950 shares valued at $16.9 million.

The reasons behind Wood’s decisions to sell could be multifaceted. One might speculate that she is securing gains after significant stock price increases, possibly rebalancing her portfolio or anticipating market corrections post-earnings. Her strategy often involves betting on disruptive technologies in their infancy, and both Roblox and Palantir have indeed shown disruptive potential in their respective fields. However, the timing of these sales before earnings reports might suggest either a cautious approach due to high expectations already baked into the stock prices or a strategic move to capitalize on current valuations.

Despite these sales, both Roblox and Palantir remain key components of the ARK Innovation ETF, with Roblox being the fourth largest holding at 6.37% and Palantir the fifth at 5.72% as of Feb. 2, 2025. This indicates that while Wood might be adjusting positions, her confidence in these companies’ long-term value remains intact.

The broader market implications of Wood’s moves are intriguing, as they signal both the volatility and potential of investing in high-growth tech sectors. Investors often look to Wood’s actions as indicators of where the market might be heading, particularly in tech innovation. However, these moves also underscore the importance of timing, market sentiment, and the ever-evolving landscape of technology investment, where even the most promising companies can face unexpected shifts in investor confidence.

WallStreetPit does not provide investment advice. All rights reserved.

About Ron Haruni 1219 Articles
Ron Haruni

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