Rather than a beautiful butterfly spreading joy across my portfolio, this one’s been more like a moth gathering dust at the bottom of it. You see, I didn’t invest at $1, or even $2 or $4. I bought shares of this digital health firm for $13 a pop back in 2021!

Therefore, even after this massive rally, I’m still down by around 66%.

Should I keep holding to see if the stock finally metamorphoses into a wining investment? Let’s take a look.

What the company does

Butterfly Network has developed the world’s first handheld, whole-body ultrasound probe (Butterfly iQ). This offers high-quality imaging at a fraction of the cost of those traditional (clunkier) machines in hospitals. 

Built on patented Ultrasound-on-Chip technology, it has miniaturised the technology onto a single semiconductor. These devices connect seamlessly to smartphones and hospital computer systems, making ultrasound more accessible, portable, and affordable. Butterfly Network’s cloud-based platform stores the data.

Beyond hospital diagnosis and pregnancy scans, they’re used by medical students and vets to conduct examinations in-clinic, on farms, or even in wildlife conservation settings.

What went wrong?

When the company went public in 2020, it said it aimed to “disrupt a large and expanding total addressable market” valued at $8bn. It projected that revenue would grow to $122m in 2022, up from $44m in 2020.

At that time, interest rates were still close to 0%. Then post-pandemic inflation struck and rates soared. The stock dropped 80% between February 2021 and 2022 as investors quickly dumped loss-making growth firms like Butterfly Network.

The company’s growth also disappointed. In 2022, revenue was $73.4m (not $122m), and then it fell 10% to $66m in 2023.

This is the main risk here. The company needs to grow a lot in future, and this isn’t certain. Meanwhile, it raised $76.5m by selling shares last month, so further shareholder dilution can’t be ruled out.

Growth is back!

Investors have warmed back up to the investment case because CEO Joseph DeVivo, appointed in 2023, has reignited the growth engine. In Q3, revenue jumped 33% year on year to $20.6m — the fifth consecutive quarter in which it met or exceeded expectations.

The growth is being driven by its next-generation Butterfly iQ3. This AI-powered device contains a much more powerful semiconductor chip that produces faster image processing and higher-resolution ultrasound scans.

Another exciting development is Butterfly Garden, a platform enabling third parties to create custom AI applications using its imaging technology. Since launching in August 2023, it has attracted 17 partner companies, expanding Butterfly Network’s chip licensing potential.

Looking ahead, the company aims to achieve cash flow breakeven by the end of 2027 and to exceed $500m in revenue by 2030. For context, revenue is expected to grow 20% to $90m this year. That translates into a forward price-to-sales ratio of about 10.

Given the company’s vastly improved growth outlook, I’m hanging on to my shares. I think it’s worth considering for risk-tolerant growth investors with a stomach for volatility.

The post 1 ex-penny stock up nearly 400% in my Stocks and Shares ISA!  appeared first on The Motley Fool UK.

Since selling is half of the investing equation, we asked some of our contract writers to share some of the lessons they’ve learned over the years!

Arrival

What it does: Arrival is a British electric vehicle manufacturer that plans to revolutionise the production of EVs with its cost-effective micro factory model.

By John Choong. Like many SPACs and IPOs during the bull market of late 2020 and 2021 promising sky-high achievements and billions in profits, Arrival (NASDAQ:ARVL) was no different. The company had IPO’d at a premium of over $20 at that time, promising billions in profits by 2025 with production no where in sight. Mistakenly at that time, I started a sizeable position, attracted by the allure of potentially doubling or even tripling my money.

How wrong I was as the firm burned through cash faster than a race car burns through fuel. Consequently, Arrival had to conduct multiple capital raises along with numerous project delays. The result of all of this is that its share price is now down by a heart-wrenching 99% from its IPO levels.

Since then, the group is yet to produce a single vehicle for public use and could run out of cash before the year ends. This was an expensive lesson in taking valuation models seriously. That said, if Arrival can secure additional funding and make good on its promises, the upside potential from its current share price could be massive.

John Choong has no position in any of the shares mentioned.

boohoo

What it does: boohoo is a British online fashion company that owns a number of brands.

By Edward Sheldon, CFA. Right now, there are a number of stocks in my portfolio that I wish I’d never bought. But one, in particular, that’s worth highlighting is boohoo (LSE: BOO). I bought this stock in an effort to capitalise on the global online shopping boom. Currently, I’m down about 80% on my investment.

The good news is that I’ve learned a few valuable lessons from my losses here. One is that it’s really important to focus on a company’s ‘economic moat’. Can it do something that other companies can’t?

In boohoo’s case, it became apparent last year that the company didn’t have that much of a moat because Chinese rival Shein was able to capture significant market share from the British company quite easily.

Another lesson is that if a stock’s short interest increases significantly (as boohoo’s did last year), it’s often just sensible to sell it. Rising short interest indicates that sophisticated institutional investors are increasing their bets against the stock.

Can boohoo shares bounce back? It’s possible. It does own some powerful brands such as PrettyLittleThing and Debenhams. And supply chain/inflation issues that have plagued the company in recent years should start to moderate soon. I’m not expecting to break even any time soon, however.

Edward Sheldon owns shares in boohoo.

boohoo

What it does: boohoo is an online fashion retailer, targeting younger buyers in the UK.

By Alan Oscroft. Shares in boohoo (LSE:BOO) are down around 80% in five years, and have lost almost 90% of their value since a peak in 2020.

So what do you do when shares you own fall in price, and you think they look cheap? Well, I bought more. And then watched them drop even further.

I didn’t think the company’s troubles would turn out so bad. But what does it look like today?

It’s difficult to put a valuation on the shares right now, as analysts expect earnings losses for the next couple of years. On a price to book value basis of around 1.25, the stock could be good value, though.

For the year just ended, revenue fell 11%. It was still up 43% since 2020, and the firm did report positive adjusted EBITDA. It looks like there’s sufficient liquidity too.

I’m tempted to buy more, again. But I’ll resist, and just keep watching.

Alan Oscroft owns boohoo shares.

boohoo

What it does: boohoo designs and sells clothing, shoes, accessories and beauty products

By Paul Summers: Things have been pretty awful for online retailers over the last couple of years. One high-profile victim of multiple economic headwinds, including the cost-for-living crisis, has been boohoo (LSE: BOO). Corporate governance concerns haven’t helped either. 

Sadly, all this has led to it becoming by far my worst-performing holding.

On a positive note, boohoo still has net cash and is trading in line with guidance. Looking ahead, a new US distribution centre will drive efficiencies and help reduce customer waiting times. Supply chain costs are also expected to be lower.

But a recovery will take time. Profitability has dived and I’m struggling to see how it will return to levels seen during the boom years.

As a Fool, I always try to take a long-term approach to investing. However, my patience is being sorely tested here. The next update will probably determine whether it stays in my portfolio. 

Paul Summers owns shares in boohoo.

Butterfly Network

What it does: Butterfly Network makes portable handheld ultrasound devices and associated software.

By Ben McPoland. There are many shares I wish I’d never bought, but Butterfly Network (NYSE: BFLY) springs to mind instantly.

Why do I regret this one? Well, a painful 84% drop in the value of my investment is one BIG reason why. A quick check of my ISA informs me that after a couple of years my £500 investment is now worth just £80. Ouch!

Now, I’ve made poor investments before and I’m certain I will again. But why this shocker grates on me is because I bought into a story (and seemingly not much else).

The story was that Butterfly’s portable ultrasound-on-a-chip device would essentially replace the doctor’s antiquated stethoscope. Medical practitioners would increasingly use Butterfly’s ultrasound, as well pregnant women at home, and growth would skyrocket.

While that may eventually turn out to be true, the firm’s sales growth has stalled while big losses continue. The CEO left last year. So I’m hanging on to my shares more in hope than expectation nowadays.

Ben McPoland owns shares in Butterfly Network.

The post 5 stocks Fools wish they never bought appeared first on The Motley Fool UK.

What’s gone wrong here?

SPAC mania

In 2020, there emerged a trend in the US where companies started going public via something called a ‘special purpose acquisition company‘ (SPAC). This is a company with a pile of money that it uses to buy or merge with another company in order to take it public.

Many of these companies were wildly overvalued a couple of years ago. And most of them have lost a substantial amount of their market value since. Butterfly Network went public through a SPAC in February 2021. That is around the time when I invested in the stock, at $19.

But rather than flying upwards, Butterfly Network stock has since had its wings brutally clipped. Today, less than two years later, the share price is $3.70. Its market cap has fallen from over $3bn to just $677m.

All in all, I’m nursing a painful 80% loss.

Unfulfilled promise

Butterfly Network is a health-tech company whose disruptive technology turns a smartphone into an ultrasound machine. Instead of traditional hardware, the company has pioneered a way to put ultrasound on a semiconductor chip.

The firm’s medical imaging devices are handheld and portable. And the mission is to make them as commonplace as stethoscopes for health professionals around the world.

Butterfly Network’s app allows clinicians to capture images, access patient information, and send scans. This software side of the business has much higher margins than the imaging hardware side.

The company reported revenue of $62.2m for the full year 2021, up 35% on 2020. However, prior to going public, Butterfly Network had originally guided for full-year 2022 revenue to be $138m. It has become obvious that the firm is going to fall well short of that target this year.

Meanwhile, it expects to lose between $145 million and $155 million for the full year. So basically, we’re looking at a company that overpromised but has so far under-delivered.

Stick or twist?

Peter Lynch once said: “In [investing], if you’re good, you’re right six times out of ten. But the times you’re right, it overcomes your mistakes”.

I was reminded of this quote today when I looked at my portfolio to check how much I’m actually down on this stock. That’s because directly above Butterfly Network (alphabetically) is my holding in Axon Enterprise. And that stock is up over nearly 300% for me, even after the overall stock market decline this year.

The gains from that one investment completely dwarf my losses in Butterfly Network shares. As Peter Lynch pointed out, the winners compensate for the losers, and then some.

Anyway, I’m not going to invest more money in Butterfly Network stock. The company has not grown as quickly as I’d hoped it would. And I overpaid for the stock, which I’m paying the price for now.

But I’m still not going to sell my shares just yet. Maybe they’ll take off one day and I’ll be happy I was patient.

The post Why this US growth stock is now my worst ever investment appeared first on The Motley Fool UK.