Cathie Wood Says Innovation Stocks Are in ‘Bargain-Basement’ Territory — Here Are 3 Contrarian Tech Names to Consider

But Ark Invest’s Cathie Wood is sticking to her guns.

In fact, she recently told CNBC that we have “one of the most massive misallocations of capital in the history of mankind.”

“You have investors investing in the past. Benchmarks are where they are, and especially the largest companies and stocks in the benchmarks are where they are because of past successes,” Wood said. “If we're right those are the companies that are going to be disrupted.”

Wood also believes that the current risk-aversion has pummeled innovation stocks into “bargain basement pricing.”

Within that context, here’s a look at three compelling names in ARKK’s portfolio that could make a comeback.

Teladoc Health (TDOC)

Teladoc Health is one of the leading telemedicine companies in the U.S. It has a consistent track record of revenue growth and margin improvement.

Not surprisingly, the company benefited from the extraordinary environment brought on by COVID-19.

When non-life-threatening, in-office medical care was put on hold during the peak of the pandemic, telehealth adoption exploded.

Teladoc’s revenue increased 98% in 2020 to $1.09 billion, with total visits surging 156%.

The momentum continued in 2021, as the company posted 86% revenue growth and an increase in total visits of 38%. It also generated $194 million in operating cash flow for the year — a significant jump compared to negative $54 million in 2020.

Teladoc stock is down over 32% year to date, but remains ARKK’s second-largest holding, accounting for 6.5% of the fund’s weight.

Wood is not the only one who sees potential in the telemedicine company. On Feb. 11, Goldman Sachs analyst Cindy Motz initiated coverage on Teladoc with a buy rating and a price target of $121, emphasizing that the company is “paving the way for the healthcare technology sector to become more disruptive.”

Motz’s price target implies potential upside of roughly 100%.

Unity Software (U)

Often touted as a top-tier metaverse play, video game software development company Unity garnered a lot of investor attention last year.

In November, the company acquired the visual effects studio behind “Avatar” and “Lord of the Rings.” The stock soared to over $200 per share on Nov. 18 but quickly gave up the gains.

Today, Unity trades at around $97 apiece, down over 50% from those 52-week highs.

Business, however, has continued to grow rapidly.

In Q4 of 2021, revenue rose 43% year-over-year to $315.9 million. Adjusted net loss was 5 cents per share, compared to an adjusted net loss of $0.10 per share incurred in the year-ago period. The numbers also topped Wall Street’s expectations, as analysts were projecting a loss of 7 cents per share on $295.5 million of revenue.

While shares continue to trade at beaten-down levels, Unity remains one of the top 10 holdings at Wood’s flagship fund, with a weighting of 4.9%.

On Feb. 4, Credit Suisse reiterated an outperform rating on Unity and set a price target of $180 — roughly 86% above the current levels.

Block (SQ)

Investors looking for contrarian ideas should check out Block, the digital payments technologist formerly known as Square.

Management changed the name in December because “Square” had become synonymous with the company’s seller business. But the move did little to cheer up investors. Year to date, Block shares have tumbled more than 40%.