These Cathie Wood stocks look cheap after getting cut in half and could be buys from here

Published Wed, Feb 2 20221:15 PM ESTUpdated Wed, Feb 2 20223:01 PM EST

The growth stock meltdown in January pushed the multiples of many Cathie Wood-loved names back down to earth, creating a possible buying opportunity for investors willing to bet the popular innovation manager will be right over the long term. Wood's flagship fund, Ark Innovation , has been ravaged in 2022 following increasing signals from the Federal Reserve that it will take aggressive monetary action to slow down historic levels of inflation. Ark Innovation is down more than 22% in 2022 alone, as government bond rates move higher and punish growth pockets of the market. Ark Innovation, full of "disruptive innovation" stocks, is known for containing equities that trade at astronomical price-to-sales ratios. That ratio is a valuation metric that compares a company's share price to its revenue. The higher it goes, theoretically the more expensive the stock is. These expensive names got hit the hardest in January as investors were blindly selling anything with a high price-to-sales ratio while fearing the Fed. But now, those stocks are down so much and their valuation, though still somewhat high in many instances, is way down. CNBC's Jim Cramer recognized the discount in these names and said he would rather own than sell almost the entire Wood portfolio . "These growth stocks have come down enough that they're tempting enough to buy right here — then you can buy a little more at lower levels if they keep going lower," the "Mad Money" host said. To capitalize on these so-called bargains, CNBC PRO screened for stocks in Ark Innovation with current price-to-sales ratios down more than 30% from their average levels of the past three years. All the listed stocks have a current price-to-sales ratio below 10. We narrowed the list by only picking stocks that are down more than 50% from their highs. Plus, the majority of Wall Street analysts assign these equities a buy rating. Take a look at CNBC PRO's list here. The world's largest cryptocurrency exchange, Coinbase Global , is down 54% from its high with a price-to-sales ratio well below its average. Plus, Wall Street sees the stock gaining more than 81% over the next 12 months. Despite the recent crypto market volatility, Goldman Sachs told clients to buy shares of Coinbase. "We continue to believe that COIN represents the blue chip way to gain exposure to the continued development of the crypto ecosystem and believe further progress on new revenue initiatives could lead shares to outperform its 'beta' to crypto prices," said Will Nance, analyst at Goldman Sachs. "If you want a publicly traded proxy for crypto, you don't have any other decent options," Cramer said regarding Coinbase. DraftKings is down nearly 70% from its high and the sports betting company is more than 20 points below its average price-to-sales ratio. Analysts on Wall Street see the stock rallying nearly 113% over the next year. Morgan Stanley upgraded the name to overweight from equal weight last week, saying that a stronger-than-expected start for mobile gaming in New York showed that the growth story for DraftKings is not done yet. The Wall Street firm said shares are oversold, even for a company that is not yet profitable. Streaming platform Roku 's price-to-sales ratio has also come way down, to 5.7 compared with the average of 11.4. The stock is more than 66% away from its most recent high but Wall Street sees it gaining nearly 100% from its current levels. Roku is an "incredibly lucrative business with a fantastic balance sheet," Cramer said, expressing surprise at the magnitude of the share price decline, especially considering a large runway ahead for international growth. Block , formerly Square, is down about 56% from its high and its price-to-sales ratio is at 3.1, compared with the average of 8. Wall Street expects the payments company to rally more than 84% this year. Twilio is off 54% from its high but analysts see it gaining more than 73% over the next 12 months. The software company's price-to-sales ratio is down to 10, compared with the average of 16.5. Goldman recently gave Twilio a buy rating, and said it estimates the company already addresses $100 billion in the market. "Management's guidance for 30%+ organic revenue growth for each of the next four years both projects confidence and reflects the trend of the confluence of business applications and communications services, opening a myriad of new use cases," said Kash Rangan, analyst at Goldman. Exact Sciences has lost about half of its value since its high but Wall Street sees the stock gaining more than 64% from here. Sea and Signify Health are down roughly 57% and 67%, respectively, from their highs. Wall Street sees the pair gaining 64% and nearly 120% in the next 12 months. 2U and Veracyte also made CNBC PRO's list of cheap, compared to history, Ark stocks. 2U is down more than 72% from its high but is forecast to rally more than 113% in the next year. Veracyte is down more than 63% from its high but is estimated to gain more than 86% in the next 12 months. — With reporting from CNBC's Michael Bloom.

Catherine Wood, chief executive officer of ARK Investment Management LLC, speaks during the Milken Institute Global Conference in Beverly Hills, California, on Monday, Oct. 18, 2021.

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