When it comes to social media, companies are constantly trying to think of new ways to keep people on their platforms. Any distraction can take people away from their online life and back into the real world. But what if people never had to leave? What if everything they wanted to engage with was all there for them at the touch of a button?
This is what the metaverse hopes to achieve: a virtual world where everything from work to gaming to live events can all take place without you ever having to leave. I won’t go into the details, but if you want to read more about what the metaverse could be, you can click here.
So as we all descend deeper into the virtual rabbit hole, how can investors get involved in what could be one of the biggest changes to our daily lives in years? Well, both Facebook (NASDAQ: FB) (or should we say, Meta) and Roblox (NYSE: RBLX) already offer exciting opportunities to invest in the metaverse. Let’s take a look and see which company offers the most attractive proposition.
Facebook: Bull vs Bear Arguments
Facebook announced last week that, as of December 1, it will begin trading under the new name Meta. This rebrand emphasized the company’s dedication to the creation of its metaverse and its willingness to put it at the forefront of all of its future business. “We are at the beginning of the next chapter for the internet, and it’s the next chapter for our company too,” said CEO Mark Zuckerberg.
When we take a look at the bull case for Facebook, a couple of things stand out in particular. Despite having its advertising segment thrown into disarray by Apple’s iOS 14 update, Facebook still reported strong ad revenue growth of 33% year-over-year (YoY) for the last quarter. It also grew its user base by 12% YoY to 3.58 billion — that’s almost half the population of the entire world!
The company also detailed some of its lofty expansion plans for the metaverse. A focus on virtual reality (VR) and augmented reality (AR) devices is planned for the near future, with Facebook already revealing a ‘robot skin’ called ReSkin which could potentially be used to allow us to sense touch while we’re all plugged into the metaverse. Facebook has the technical capacity and the financial power to develop its metaverse quicker than almost anybody else in the space. This could be key in building a dominant market share.
Despite these developments though, Facebook is never far from controversy. Company-wide outages last month and a litany of negative headlines following the emergence of a whistleblower have plunged the company into disrepute. Couple this with the headwinds currently faced by the company following the global pandemic and Apple’s iOS update and there are certainly grounds for concern. Investors would be wise to follow these stories keenly before buying any stock in the company.
Roblox: Bull vs Bear Arguments
Roblox was creating its metaverse before it was cool. Much of what Facebook promised surrounding its metaverse has already been pioneered by the California gaming company. Roblox, which went public in March, already has a bustling online world where its user-base can interact with others and engage in a myriad of games and other online experiences.
Roblox’s typical user is currently aged from nine to 13, but the company is looking to expand this by increasing its offerings to suit a more mature crowd. Already, virtual concerts by artists such as Twenty One Pilots and Lil Nas X have demonstrated the company’s ability to pivot away from its very young user base and become more universally accepted.
Roblox has experienced fantastic growth, particularly as the COVID-19 pandemic forced more and more people to stay indoors. Revenue growth of 116% YoY was reported in Q2 of this year, with daily active users also ballooning by 29% YoY. These positive trends will be welcome news to investors who will hope to see the company continue to grow.
However, the company still operates under a net loss, with a loss of $140.1 million reported in Q2. Questions also linger about Roblox’s means to really challenge bigger companies like Facebook in developing the metaverse. A lack of cash to fund development and the reliance on such a small age range for its user-base could hinder the company as it looks to expand its offerings to a fully-fledged virtual world.
So which stock is a better buy right now?
Right now, it seems like Facebook is set to rapidly expand its metaverse operations, using its vast amounts of cash and huge collection of assets to do so. While Roblox could be a huge part of the future of the metaverse, Facebook has positioned itself extremely well to take over the reins as the world’s foremost virtual world builder and looks to be the better investment at this point.
To find other worthy investments, check out MyWallSt’s shortlist of market-beating stocks. Click here for a 7-day free trial.
Financial Writer at MyWallSt
Pádraig’s favorite stock is Nike. Growing up as a sports fanatic, seeing Nike collaborate with athletes like Jordan, Lebron, and Ronaldo inspired him and cemented the brand in his mind. Now, despite having failed miserably in his attempts to earn a fabled Nike sponsorship, he still believes in the innovation and creativity behind Nike and is convinced they will only grow stronger as the world's leading sports brand.