Cathie Wood's ARK Invest is doing what any smart investor does after a big win: taking some chips off the table. The firm sold 40,392 shares of Shopify Inc. (SHOP) on Sep. 2, right after the e-commerce platform's stock ripped higher by more than 25% in August, pushing it past $158. The move raises a question that's been nagging at growth investors for a while now: Is ARK getting picky as valuations stretch, or is this just smart portfolio management?
Let's break down the trade. The ARK Innovation ETF (ARKK) unloaded 35,322 shares, while the ARK Next Generation Internet ETF (ARKW) sold another 5,070. That's not a massive position cut, but it's a clear signal. Shopify's stock has cooled off a bit since then, pulling back about 7% in the past week. And here's the thing: even after that pullback, the trailing price-to-earnings ratio is hovering near 96 times. That's not cheap, no matter how you slice it.
But the underlying business? It's still firing on all cylinders. Second-quarter revenue jumped 34% year over year to $3.58 billion. Gross merchandise volume rose 32% to $115.57 billion. And free cash flow hit $654 million, giving Shopify an 18% free-cash-flow margin. So the question isn't whether Shopify is a good company. It clearly is. The question is whether the stock got ahead of itself, even for a growth story like this.
ARK's actions suggest they think the latter might be true, at least for now. But it's not like they're abandoning ship. Shopify still holds a meaningful spot in ARK's lineup. Recent data shows SHOP at roughly 3.4% of ARKK and 4.1% of ARKW. It's an even bigger position in the ARK Fintech Innovation ETF (ARKF), where it makes up about 7.5% of the fund. So this isn't a wholesale exit. It's more like a rebalancing.
And where is that money going? ARK has been busy deploying capital into other high-growth themes, which tells you they're not turning cautious on growth overall. They're just being more selective.
