In 2022, Cathie Wood and Ken Griffin’s paths couldn’t have diverged any more sharply. While Wood’s bet on innovative growth-flavored stocks proved disastrous with her flagship ARKK fund posting huge losses, Griffin’s Citadel hedge fund notched profits of $16 billion – the most Wall Street had ever seen.
But while the two famous investors’ fortunes differed dramatically last year, the pair have some things in common; both try to beat the market using singular techniques whether it’s Wood’s penchant for doubling down on the outré and cutting-edge or Griffin’s adherence to quantitative investment techniques. And at times the two paths meet: some of the stocks nestling in their respective portfolios are the same. Therefore, when two very different heavy hitters show a preference for similar names, investors should take note.
With this in mind, we dipped into the TipRanks database and pulled up the details on two stocks both have been padding the portfolio with. With help from the platform, we can also find out what the Street’s cadre of analysts have to say about these names. Let’s take a closer look.
Twilio Inc. (TWLO)
First up on our Wood/Griffin-endorsed list is Twilio, a CPaaS (communication platform as a service) leader. Using a set of configurable communication tools, Twilio’s cloud communications platform enables client engagement. The platform enables app developers to integrate voice, messaging, video, and email functionality. From its impressive clientele, which includes companies like IBM eBay, Reddit, Shopify, Airbnb, and Uber among plenty of others, it is evident that Twilio is at the vanguard of this secular trend.
Indeed, Twilio rode the pandemic-driven pivot toward digital channels well and the shares benefitted immensely during the Covid crisis. But former tech high-flyers were thoroughly decimated in last year’s bear and the stock took a big hit. However, the shares have been on the comeback trail in 2023, helped along by a strong Q4 print.
In the quarter, the company generated revenue of $1.02 billion for a 21.6% year-over-year increase, while beating the Street’s call beats by $20 million. Twilio saw out the year with more than 290,000 Active Customer Accounts compared to 256,000 at the end of 2021.
On the bottom-line, adj. EPS came in at a surprise profit of $0.22, well ahead of the -$0.08 predicted by the analysts. And the company guided for Q1 EPS between $0.18 – $0.22, also far above consensus at 0.01.
Wood was already a big fan but bought another 583,314 TWLO shares in Q4, bringing her total holdings to 7,409,945 shares. At the current market price, these are now worth $556 million. As for Griffin, he pulled the trigger on 1,554,498 shares in the quarter. In total, he now owns 1,562,298 shares worth over $117 million.
Also showing confidence in the CPaaS player is JMP analyst Patrick Walravens, who sees several reasons to back Twilio, including: “1) it has the dominant developer-focused communication platform, which it is reverting to a product-led growth strategy; 2) it offers a growing suite of high-margin customer engagement software solutions, including Flex, Segment, and Engage, which are now operating as a separate business unit; 3) it addresses a large TAM estimated to be ~$80B in 2022; 4) the company’s new focus on driving profitability coupled with actions like a $1B buyback and CEO Jeff Lawson’s plan to purchase $10M of common stock in the open market; and 5) the impending conversion of the Class B shares into Class A shares on June 28, 2023 reflects the next stage of Twilio’s growth and maturation and a positive development from a corporate governance perspective, in our view.”
All in, Walravens rates TWLO shares an Outperform (i.e., Buy), along with a $110 price target. The implication for investors? Upside of 45% from current levels. (To watch Walravens’ track record, click here)
Looking at the consensus breakdown, based on 14 Buys, 10 Holds and 1 Sell, the stock claims a Moderate Buy consensus rating. Going by the $84.78 average target, the shares will climb ~12% higher in the year ahead. (See Twilio stock forecast)
DraftKings Inc. (DKNG)
The next stock both Griffin and Wood are leaning into is DraftKings, another name that was a big pandemic-era winner that fell on hard times with the reopening.
You could say the daily fantasy sports and sports betting company is a pure-play on the ongoing legalization and use of online sports betting in the U.S. While in the past, you would have to search out the nearest gambling den if you fancied making any bets, today you can just open an app and roll the dice – as long as it is legal to do so in the state where you reside. And here is where the potential for growth lies because online sports betting is not yet legal in roughly 40% of U.S. states. DraftKings is not yet to fully active in all legal states, either, with the DraftKings Sportsbook available in 20 states.
Growth was certainly on tap in the company’s latest quarterly statement – for 4Q22. Revenue rose by 80.8% year-over-year to $855 million, coming in ahead of the Street’s forecast by $55.75 million. EPS of -$0.53 also beat the -$0.58 forecast.
As a result, the company raised expectations for the coming year, increasing the 2023 revenue guidance from the range between $2.8 billion to $3 billion to the range between $2.85 billion to $3.05 billion. DKNG also now anticipates 2023 adjusted EBITDA between ($350) million and ($450) million vs. the prior ($475) million to ($575) million range.
Investors liked the latest results and it’s safe to say both Griffin and Wood are betting on DKNG’s ongoing success. In Q4, Griffin pulled the trigger on 4,506,200 shares, bringing his total to holdings to 5,015,666 shares worth almost $98 million, while Wood holds 25,032,084 shares – worth north of $488 million.
Mirroring Wood and Griffin’s confidence in DKNG, Craig Hallum analyst Ryan Sigdahl thinks the latest print offers plenty to be upbeat about.
“DKNG reported a strong beat/raise with the most notable surprise being the cost efficiencies evident in Q4 results and revised 2023 guidance,” the 5-star analyst explained. “We think this is an important pivot in management mindset from not just growth but also expense management. As we’ve said in prior notes, industry conditions improved in 2H22 (promotional/marketing intensity lessening, betting remains strong), DKNG is taking share (driven by product innovation and structural improvements), and investor sentiment is starting to turn. We continue to believe DKNG will be one of the few long-term winners in the sector and will be highly profitable long term, and we think this quarter provides improved visibility to that.”
Unsurprisingly, Sigdahl rates DKNG shares a Buy, while his $27 price target makes room for 38% appreciation in the year ahead. (To watch Sigdahl’s track record, click here)
Elsewhere on the Street, the stock garners an additional 12 Buys and with the addition of 6 Holds and 2 Sells, all for a Moderate Buy consensus rating. The forecast calls for one-year gains of 17%, considering the average target stands at $22.86. (See DKNG stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Source: finance.yahoo.com