Cathie Wood is buying the top e-commerce stock, down 36% and she won't stop selling Palantir.

After the stock trading of money manager Cathie Wood, it can be an interesting activity for individual investors, and it can also provide some inspiration. She seeks disruptive technology stocks for her company, Ark Invest, which manages multiple exchange-traded funds (ETFs). While her risk appetite may be beyond the reach of many investors, some of her funds have performed well lately, and she is an early bull of many of today's top tech stocks.

Her flagship fund, Ark Innovation ETFlag S&P 500 In the past five years, the magnitude has been very large. It was flat during that period, while the index rose 106%. But Wood focuses on a long-term focus, and her stocks are able to change the world and generate shareholder value.

She has been stacking e-commerce giants for weeks Shopping (Nasdaq: Shop) At the same time, she has reduced her position in an artificial intelligence (AI) company Palantir Technology (NASDAQ: PLTR). Let's see if this strategy makes sense to you as well.

Image source: Getty Images.

Amazon U.S. e-commerce with approximately 40% of the total market. Unless you shop with an orange or Amazon, everyone else will understand better. That's because Shopify is an e-commerce platform and does not generate revenue directly by selling products online. Instead, it serves merchants and makes money by providing them with service subscriptions and payment processing. That said, its total merchandise sales (GMV) is very similar to Amazon’s core e-commerce sales - $75 billion in the first quarter, while Amazon’s online/physical stores and subscription services are $75 billion. As the largest e-commerce software platform in the United States, it is handling most of its domestic e-commerce activities.

This journey has caused stock volatility over the past few years as the company has experienced more and more pain. Today, it is in a good position to report strong growth and improved profitability. For the first quarter, revenue increased by 27% year-on-year, and operating income more than doubled. Free cash flow increased by 56% and profit margins were 15%, up from 12% in the same period last year.

Shopify has multiple growth drivers, and it leverages its highest position to capitalize on new opportunities. It expands its platform offerings to attract a wide range of customers from small businesses to enterprise customers. This is also a bigger driving force abroad - international revenue accounted for only 30% of the total in the last quarter, making it a huge growth track.

Shopify stock is still down 36% from its all-time high reached during the pandemic. As a result, its valuation has fallen, but given its price to price 80 is 80, the forward price (P/E) ratio is 60. This may still be an attractive entrance to long-term investors who can take some risks.

Silhouette of a man walking under the palantir sign
Image source: Getty Images.

The market has been fascinated with Palantir stock, and there is good reason. Data analytics companies grow at an amazing rate and enjoy strong profitability. Generative artificial intelligence (AI) enhances its capabilities and prospects, and it has become a poster for supercharged AI stocks.

Palantir offers two platforms with similar services, but is specifically used in separate markets. Gotham aims at the government and defense industries, while foundries target the commercial industries. Both platforms can help organizations and businesses organize and analyze large-scale datasets to make informed decisions and take quick action. Its service can simplify and sort data from large language models (LLMS) to make generating AI simpler for developers, which is why generating AI has become a key growth driver.

In the first quarter, revenue grew 39% year-on-year, driven by a 71% increase in U.S. business sector. In the quarter, it ended at least $1 million in 139 deals, at least $51 in 5 million in 51 in 31 deals, and at least $10 million in 10 million in 10 million in 10 million in 2018. Contract value increased 182% to $810 million in the quarter. This forward-looking figure represents the potential life value of a contract signed over a period of time.

As a service-based system, it has very powerful profits. Operating margin for the first quarter was 20%, and operating margin for excluding stock-based compensation was 44%. Net income margin is 24%.

Palantir is so important that only one thing erodes the investment papers of stocks: Its valuation is extremely expensive. It has a forward PE ratio of 175 at 175, while the priceless spot ratio is 241. Both numbers are higher than their most recent average.

Cathie Wood isn't scared by overvalued fears, but even she seems to recognize that the price of Palantir stock is perfect. The company is likely to maintain its strong growth for quite some time, and there may be new products that can expand its market opportunities. Even so, this headwind may not be enough to conduct long-term valuations. At these levels, investors should carefully evaluate their risk appetite and beliefs before jumping in. Existing shareholders should take into account future possibilities and they may find more returns elsewhere.

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John Mackey, former CEO of Amazon's subsidiary Whole Foods Market, is a member of the board of directors of Motley Fool. Jennifer Saibil has no position in any of the stocks mentioned. Motley Fool has a location and recommends Amazon, Palantir Technologies and Shopify. Motley Fool has a disclosure policy.

Cathie Wood is buying the top e-commerce stock, down 36% and she won't stop selling Palantir. Originally published by Motley Fool