One of the most successful investment strategies is identifying companies part of rapidly expanding addressable markets. Therefore, investors need to shortlist high-growth verticals that attract capital at a robust pace, allowing enterprises to grow revenue at a desirable rate.
A metaverse is defined as an integrated network of virtual worlds that is three-dimensional. The metaverse will enable social interactions via the use of virtual reality (VR) devices. People will use their digital avatars to interact virtually with each other. The possibilities are endless, and several companies are investing heavily in this space.
The metaverse development is still at a nascent stage, and it may take years for companies to generate meaningful revenues. However, early investors may generate exponential gains given the metaverse market might surpass $1 trillion by 2030 — up from less than $40 billion in 2022 — indicating an annual growth rate of almost 40%.
Let’s take a look at a few companies poised to gain traction in the metaverse.
Formerly known as Facebook, Meta Platforms (NASDAQ: META) changed its name and ticker symbol last year to reflect its focus in the metaverse space. The world’s largest social media platform, Meta, is probably the safest metaverse stock right now. It has a highly engaged user base and the required resources to create or build a robust metaverse-based platform.
Meta stated it will launch a web version of its social virtual reality platform Horizon in 2023, allowing people to access metaverse experiences without needing a headset. Mark Zuckerberg, the CEO of Meta, believes the best metaverse experiences will be on virtual and augmented reality (AR) platforms.
Meta’s Reality Labs segment generates revenue from augmented and virtual reality devices and related software and content. In Q1, Reality Labs’ income stood at $695 million, compared to year-ago revenue of $534 million. However, its operating loss also widened from $1.82 billion to $2.96 billion in this period.
One of the largest semiconductor companies globally, Nvidia (NASDAQ: NVDA) is valued at a market cap of $420 billion. Primarily known as a manufacturer of graphic chips, Nvidia products will be essential for integrating devices with an individual’s digital avatar.
In 2020, Nvidia launched the omniverse program, a scalable, multi-GPU reference development platform for 3D simulation and design collaboration. The omniverse is a prototyping tool used by those looking to develop a virtual product.
Earlier this year, Meta announced it would purchase 16,000 A100 processors manufactured by Nvidia to process artificial intelligence workloads.
Vuzix (NASDAQ: VUZI) is a lesser-known metaverse stock that generated just $13.16 million in sales last year. However, the small-cap stock is valued at a market cap of $425 million and is forecast to increase sales to $21.8 million by 2023. Vuzix supplies smart glasses and augmented reality technologies and products to customers.
While the company’s sales fell by 36% year-over-year in Q1, Vuzix expects the adoption of smart glasses to accelerate in the second half of 2022. Vuzix has invested in its core technology and original equipment manufacturer (OEM) component platforms in the last year. These investments have improved Vuzix’s ability to manufacture a higher volume of devices at competitive price points.
Due to its relatively smaller size, Vuzix is a high-risk bet compared to other metaverse stocks mentioned here.
Valued at a market cap of $13 billion, shares of Unity Software (NYSE: U) are down almost 80% from all-time highs. It creates and operates an interactive 3D content platform that provides software solutions to run and monetize interactive content for mobile phones, tablets, and consoles, as well as AR and VR devices.
The company’s game engine is used to create a significant number of games, while the Create platform integrates tools for graphics and sound.
Unity’s sales rose 43% year-over-year to $772 million in 2020 and climbed 44% to $1.1 billion in 2021. It aims to grow its top line by 30% in the long-term and registered a 36% revenue growth in Q1 of 2022.
The final metaverse stock on my list is Matterport (NASDAQ: MTTR), a spatial data company. It offers a 3D data platform called Matterport twins to build and operate spaces. Further, Matterport Capture is an app that captures an area’s depth, data, and imagery using 3D cameras.
Matterport’s suite of products allows users to virtually explore real indoor spaces, making it ideal for real estate participants amid the ongoing pandemic. But it’s now gaining traction in other verticals such as retail, architecture, and insurance.
Analysts tracking Matterport stock expect sales to increase by 15% to $128 million in 2022 and 41% to $181 million in 2023.
Writer at MyWallSt
Aditya took an interest in the stock market during the financial crash of 2008-09. His favorite stocks include Roku and Apple as both companies enjoy a leadership position in their respective verticals and are poised to beat the broader markets consistently going forward.