Metaverse stocks have become one of the most widely-followed trends on Wall Street. Thanks to rapid progress in virtual reality technology and computing power, the metaverse space is slowly emerging from sci-fi novels and movies to become a reality.
The metaverse is composed of digital online environments in which people can live, work and play. It is a collectively shared virtual space made possible by the integration of physical reality and virtual reality.
Meta Platforms (NASDAQ:FB) was in the spotlight of investors in late October when CEO Mark Zuckerberg announced its new name designed to highlight its focus on the metaverse. Zuckerberg said:
“The defining quality of the metaverse will be a feeling of presence — like you are right there with another person or in another place… Our role in this journey is to accelerate the development of the fundamental technologies, social platforms and creative tools to bring the metaverse to life, and to weave these technologies through our social media apps.”
Companies are increasingly focused on advancing this technology, pushing the limits of the metaverse. Bloomberg Intelligence forecasts that the market size for the metaverse could reach $800 billion by 2024.
Investors are busy searching for solid bets to profit from the emergence of this groundbreaking technology. In light of such upside potential, I’ll discuss seven metaverse stocks to buy with bright growth prospects on the horizon.
With that in mind, here are seven metaverse stocks that could generate lucrative returns in 2022:
Metaverse Stocks: Fastly (FSLY)
Source: Pavel Kapysh / Shutterstock.com
52-week range: $33.87 – $122.75
San Francisco, California-based Fastly operates a real-time content delivery network (CDN), which is “a geographically distributed group of servers which work together to provide fast delivery of Internet content,” according to Cloudflare (NYSE:NET). Fastly offers a variety of cloud services related to delivery, security, computing and performance.
Management issued third-quarter results on Nov. 3. Revenue surged 23% year-over-year (YOY) to $87 million. Net loss came in at $56 million, or 48 cents per diluted share, compared to a net loss of $24 million, or 22 cents per diluted share, in the prior-year quarter. Cash and equivalents ended the period at $282 million.
Fastly offers edge computing infrastructure-as-a-service (IaaS) that brings servers and equipment to the source of data creation. As a vast amount of data transfer is required to create a virtual world in real time, Fastly is well-positioned to benefit from the metaverse. Its platform helps minimize the lag time and latency of decentralization, and can move 167 terabytes of data per second across numerous countries.
According to a new market research report, edge computing is expected to be worth around $87 billion by 2026 with a compound annual growth rate (CAGR) of 19%. Given such growth potential, investors can purchase FSLY shares at a moderate valuation. It currently hovers around $49, down 45% year-to-date (YTD). Fastly shares are about 60% lower than their peak in late Jan, trading at 17.1x trailing sales.
52-week range: $6.41 – $16.64
San Jose, California-based Immersion is a leading developer of haptics, or touch feedback technology. The company’s innovative technologies engage with users’ sense of touch. Its products are used in mobility, gaming, automotive and consumer electronics.
Immersion released Q3 results on Nov. 3. Total revenue declined 5% YOY to $7.2 million, down from $7.6 million in the prior-year quarter. However, non-GAAP net income increased 14% YOY to $4.7 million, or 15 cents per diluted share, up from $4.1 million in the prior-year quarter.
Cash and short-term marketable securities ended the quarter at $119 million. The company generates consistent cash flow, as more than 90% of revenue is recurring. It also has no debt.
Immersion solidified its leading role in haptic technology with its DualSense haptic controllers used by Sony’s (NYSE:SONY) PlayStation 5. However, most of the revenue still comes from its mobility segment.
In August, the company announced an agreement with Canada-based Titan Haptics. It will now make its haptic patent licenses available to mobile phones and wearable original equipment manufacturers (OEMs) that use TITAN’s actuators, or devices that produce “a motion by converting energy and signals going into the system.”
IMMR stock has declined more than 20% since early November. It currently hovers shy of $7 per share, down 40% YTD. Shares are trading at 5.7x trailing sales, so interested readers should consider buying at these levels.
Metaverse Stocks: Matterport (MTTR)
52-week range: $10.45 – $28
Sunnyvale, California-based Matterport is a spatial data company that digitizes and indexes the world. In business, spatial data analytics is becoming increasingly important. Aspectum, a geospatial intelligence company, provides more insight on their website:
“There’s one element that most data sets have in common — location. And this element is what allows organizations and entities to nicely organize data points on spatial analysis maps.”
Matterport was founded in 2011 and went public via a special purpose acquisition company (SPAC) in July. Its 3D data platform allows individuals to turn a space into an accurate and immersive digital twin, or the “digital copy of a real-world place or object.”
Businesses that work in construction or real estate are likely to use digital twins. For instance, Matterport allows real estate firms to develop digital twins of their buildings. Prospective buyers or tenants can then conveniently take a virtual tour within the digital space from the comfort of their homes.
Additionally, the company recently announced Matterport for Mobile, making 3D capture freely available on mobile devices.
Management released Q3 results on Nov. 3. Revenue increased 10% YOY to $27.7 million. Non-GAAP net loss came in at $14 million, or a loss of 6 cents per diluted share, compared to a non-GAAP net income of $1.5 million, or 1 cent per diluted share, in the previous year. Cash and equivalents ended the quarter at $149 million.
Matterport generates revenue by selling the tools needed to operate in virtual spaces. More than 6.2 million digital twins were uploaded to Matterport’s platform during the third quarter. Total subscribers increased 116% YOY, and subscription revenue surged 36%.
As a newcomer on Wall Street, Matterport may look like a risky bet. But its significant upside potential could be worth researching the stock further. Due to its considerable first-mover advantage, annual revenue is forecast to surge significantly in 2022.
MTTR stock trades currently at nearly $28 per share, up more than 140% over the past six months. Shares are trading at 26x book value. Interested readers could regard a potential decline toward $20 as a better entry point.
Meta Platforms (FB)
Source: Blue Planet Studio / Shutterstock.com
52-week range: $244.61 – $384.33
Thanks to its social media platforms and apps, Meta Platforms (previously known as Facebook) has become one of the most prominent digital advertising companies worldwide. And as we’ve already discussed, it has great ambitions to lead in the metaverse space.
Meta Platforms announced Q3 results on Oct. 25. Revenue soared 35% YOY to 29 billion. It generated net income of $9.2 billion, or $3.22 per diluted share, up from $7.9 billion, or $2.71 per diluted share, in the prior-year quarter. Cash and equivalents ended the period at $58 billion.
On the metrics, Zuckerberg remarked, “We made good progress this quarter and our community continues to grow … I’m excited about our roadmap, especially around creators, commerce, and helping to build the metaverse.”
In August, Meta Platforms launched Horizon Workrooms. Via its virtual reality (VR) headsets, Horizon Workrooms allows users to participate in VR meetings through digital avatars. Additionally, the company launched a pair of smart glasses that can be used to take photos, videos or calls.
With rock-solid fundamentals, FB stock currently looks like one of the safest plays in the metaverse space. It currently trades around $340, up nearly 25% YTD. At 23x forward earnings and 8.7x sales, shares look cheaper than they did several months ago.
Metaverse Stocks: Roblox (RBLX)
Source: Miguel Lagoa / Shutterstock.com
52-week range: $60.50 – $119
San Mateo, California-based Roblox is a popular online entertainment platform where players explore and develop user-generated 3D experiences. With 48 million average daily active users as of August, Roblox is a favorite among players under 18 years of age.
Analysts point out that Roblox’s current platform is as close as it gets to a social metaverse for now. Outside developers keep creating new content to integrate into existing games.
Roblox announced Q3 results on Nov. 8. Sales, excluding deferred revenue, soared 102% YOY to $509 million. Net loss widened to $74 million, or 13 cents per diluted share, compared to a net loss of $48.6 million, or 26 cents per diluted share, in the prior-year quarter. Free cash flow increased 7% YOY to $170.6 million. Cash and equivalents ended the period at $1.9 billion.
After the announcement, CEO David Baszucki remarked, “We’re very pleased that during the third quarter, people of all ages from across the globe chose to spend over 11 billion hours on Roblox … We are happy to report that the developer community earned over $130 million in the quarter and is on pace to earn well over $500 million this year.”
RBLX stock shot up by more than 40% on Nov. 9 after the company posted Q3 results. Today, the stock hit a new all-time high of $119. Interested readers could regard a further decline below $90 as a better entry point.
Roundhill Ball Metaverse ETF (META)
52-Week Range: $13.75 – $16.70
Expense ratio: 0.75% per year
Our next discussion centers on a pure-play exchange-traded fund (ETF). The Roundhill Ball Metaverse ETF, which started trading in June, offers investors broad exposure to the metaverse.
META has 41 holdings that include companies developing the essential infrastructure for the metaverse. Other businesses featured in the ETF focus on content development and experience. Gaming platforms, cloud solutions, computing components and social network stocks account for almost 70% of total holdings.
The top ten names comprise around 55% of it total net assets, which amount to $440 million. Among the leading names on the roster are Nvidia (NASDAQ:NVDA), Roblox and Meta Platforms.
META hit an all-time high of $16.70 today. It is up roughly 13% over the past 30 days. Buy-and-hold investors could consider investing around $15.
Metaverse Stocks: Unity Software (U)
Source: Konstantin Savusia / Shutterstock.com
52-week range: $76 – $207
Unity Software operates a software platform that helps game designers create and monetize real-time 3D content for mobile phones, tablets, consoles, PCs and VR devices.
Management released Q3 results on Nov. 9. Revenue increased 43% YOY to $286 million. Non-GAAP loss widened to $12.1 million, or a loss of 6 cents per diluted share, compared to $8.4 million, or 9 cents per diluted share, in the prior-year quarter. Free cash flow stood at $34 million. Cash and equivalents ended the period at $766 million.
CEO John Riccitiello stated, “Unity’s strong performance this quarter was driven by innovation in data science, vertical growth and making significant strides in bringing RT3D technologies and tools to as many creators and artists as possible.”
Almost all leading names in the global video game market rely on Unity’s technology. In fact, 71% of the top 1,000 mobile games have been developed using Unity’s platform. Thus, if you are going to bet on the gamification of the metaverse, U stock deserves your attention.
The company launched the Unity Gaming Services platform that helps developers create 2D and 3D content for augmented reality (AR) and VR devices. In addition, Unity announced a partnership with Tripolygon, a 3D modeling service for metaverse applications.
As the group grows into other segments besides video games, it shouldn’t take too long before Unity generates a profit. The platform is increasingly used for industrial applications, film, animation and engineering projects.
After the company posted Q3 results, U Stock hit an all-time high of $207 on Nov. 15. It currently hovers around $194, up 25% YTD and 78% over the past year. Shares are trading at 55x trailing sales, so a potential decline toward $165 would improve the margin of safety.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.
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