Ark Invest's Cathie Wood sees explosive earnings growth adding momentum to market in 2021

Published Wed, Jan 20 202111:36 AM EST

(This story is for CNBC Pro subscribers only.) ARK Invest founder and CEO Cathie Wood expects "explosive" earnings in 2021 as companies continue to bounce back from the pandemic recession. The manager of the largest actively managed ETF estimates the S & P 500 could produce $200 per share of earnings in 2021. Wood's estimate is higher than any of the major Wall Street firms , according to CNBC's Market Strategist Survey. In 2021, "we think there could be an earnings explosion," Wood said on her weekly Webcast earlier this month. "That would be some momentum for the markets to continue and run with." While 2020 fourth quarter earnings are still rolling out over the next few weeks, ARK Invest estimates the S & P 500 earned $100 per share in earnings last year. This was down from 2019's $140 per share, when companies were navigating a U.S.-China trade war. "We're already seeing the surprises relative to expectations. They are some of the biggest surprises I've ever seen in my career, relative to expectations," Wood added. The firm now sees 2021 earnings doubling from last year's pandemic-ridden levels, with the 500-stock average reaching earnings around the $200 per share level. The closest Wall Street firm to Wood's estimate is Deutsche Bank, which sees the S & P 500 producing earnings per share of $194. "We will have made up for quite a bit of lost time, that's what a V-shaped recovery is all about," said Wood. Market participants are paying attention to Wood and her firm, after it correctly called the V-shaped recovery and its flagship fund, ARK Innovation, returned an eye-popping 150% last year . Investors flooded into the fund to the tune of about $11 billion in inflows in the last year 12 months. However, the attention has also garnered speculation around some of Ark's big investments. Some investors are worried there's too much speculative money in her top holdings in her funds, with names like Tesla soaring more than 700% last year. Just last week, a handful of space stocks rallied after ARK announced its plans to add a "Space Exploration ETF." The move in stocks before the constituents of the ETF were even announced is an unusual phenomenon and could give investors pause. While the inflows to Wood's funds have been renowned, with more than $3 billion in the last month alone, short interest is also at a record, around 2.9 million shares, according to IHS Markit. To be sure, Wood said she would expect a correction for the fund at anytime, but she is confident in the long-term value of her picks, which have hit "escape velocity" in the aftermath of the coronavirus. "We're probably going to go through some wobbles here because of the resurgence in the coronavirus...nonetheless, we think that the forces in motion, which started last year are still in motion and that the equity markets are basically saying they will continue through this year. We think we're in a very strong recovery," Wood added.

Cathie Wood, CEO and founder of ARK Invest.

CNBC

(This story is for CNBC Pro subscribers only.)

ARK Invest founder and CEO Cathie Wood expects "explosive" earnings in 2021 as companies continue to bounce back from the pandemic recession.