Seven companies leading the metaverse charge in 2022.
The metaverse has cemented itself as an investing theme of the future, but a clear definition of the concept has yet to stick. In a report published in early February, Credit Suisse defined the metaverse as “a more spatially immersive, compelling and frictionless internet which comprises five essential components: infrastructure, hardware, content, platforms or communities and payment mechanisms.” While technology stocks have fallen since the start of the year, investing in the metaverse is a long-term play, and these lows may offer an opportunity to gain exposure at a discounted entry point. On a macro level, Grand View Research estimates that the industry will grow at a compound annual growth rate of 39.4% through 2030 and attain a market size of $678 billion. With that long-term growth in mind, here are seven of the best metaverse stocks to buy now.
Autodesk Inc. (ticker: ADSK)
Founded in 1982, Autodesk makes software products for the engineering and construction industry. Programs such as AutoCAD and Revit, a software for building information modeling, allow architects, engineers and structural designers to draft and model structures from residential buildings to commercial skyscrapers. Outside of construction, Autodesk’s media and entertainment segment offers 3D software tools to animators, modelers and visual effects artists. Like many technology stocks, ADSK has had a hard year, down more than 30% in 2022, but fundamentals suggest this angst may be shortsighted. Largely untethered to the COVID-19 environment, revenue increased for all product segments in the fourth quarter of fiscal 2022, jumping 17% overall to $1.2 billion. With a leading position in the design and construction industry, the company is guiding for double-digit revenue growth through fiscal 2026.
Shopify Inc. (SHOP)
Headquartered in Ottawa, Ontario, Shopify is the second largest e-commerce platform behind Amazon.com Inc. (AMZN), collecting 10.3% of all e-commerce retail sales in the U.S. during 2021. Its suite of software offers online retailers features to streamline payments, analytics, marketing and fulfillment. As an established leader, Shopify has a massive opportunity to shape buyer-vendor relationships in the digital world and metaverse. Retailers can now upload 3D and augmented-reality versions of their products, and Shopify recently announced that it would open a nonfungible token marketplace to sell and trade NFTs. Though COVID-driven sales growth has steadied, with the deceleration hitting the stock price, the platform still presents an impressive business model, world-class technologies and healthy financials. Total revenue for full year 2021 increased 57% to $4.6 billion, and gross profit grew 61% to $2.5 billion. “We believe Shopify is one of the most compelling growth stories in our coverage,” writes RBC analyst Paul Treiber.
Match Group Inc. (MTCH)
Match Group operates popular dating apps such as Tinder, Match.com and Hinge. In July 2020, the company spun off from parent IAC/InteractiveCorp. (IAC) and became a stand-alone enterprise with a market capitalization of $30 billion. The number of online dating users in the U.S. continues to grow, and Match maintains a stranglehold on these platforms, with Bumble Inc. (BMBL) its sole competitor at scale. Recently, mobile-app-based companies have put up stiff opposition to Google and Apple’s high app store fees, which make up the majority of Match’s cost of revenue. Any progress there will translate directly to margin expansion. As far as being one of the best metaverse stocks to buy, Match acquired video tech and social discovery company Hyperconnect in June 2021, and in November announced plans to leverage its technologies into creating a live virtual world where singles can meet and engage.
Nvidia Corp. (NVDA)
Nvidia went public in 1999, and in the early 2000s it struck key deals to place its graphic processing units in Xboxes and PlayStations. Today, its graphics and video processing chips are used in everything from next-gen data centers and high-end supercomputers to artificial intelligence and virtual reality applications. As key enablers of the digital world, Nvidia’s chips will play a key role in supporting the burgeoning metaverse. Beyond hardware, Nvidia also develops software products with metaverse-esque attributes. Its Omniverse software creates and simulates shared virtual worlds and focuses on solving real-world business problems, such as optimizing factories and designing cities. For fiscal year 2022, revenue hit a record $26.91 billion, up 61% from the year before, while net income soared 125% to $9.75 billion.
Meta Platforms Inc. (FB)
What’s in a name? Well, for Meta Platforms, which seeks to become the leading platform for shared virtual engagement, the company’s future ambitions are couched in its new moniker. Though the stock plunged about 40% following a sour earnings release in February, Meta maintains more than $16 billion in cash on hand, providing it with ample capital to invest in new projects. From avatars to marketplaces to digital currency, these platforms present a fundamentally new world for those who participate. Meta recently reorganized how it reports revenue, and like the name change, this reflects its metaverse ambitions. The Family of Apps segment recognizes advertising revenue from Meta’s legacy platforms like Facebook, Instagram and WhatsApp, while Reality Labs revenue is generated from delivery of consumer hardware products, such as Meta Quest, Facebook Portal and wearables.
Electronic Arts Inc. (EA)
Founded in May 1982 by former Apple employee Trip Hawkins, Electronic Arts (EA) is a video game company headquartered in Redwood City, California. The company pioneered early home computer games and today develops and publishes titles such as Battlefield, Need for Speed and The Sims, as well as the EA Sports franchise, which includes FIFA, Madden NFL and NBA Live. With established infrastructure and user bases, video game companies may be some of the purest metaverse stocks to buy. Tapping into this trend, Electronic Arts altered its business model and shifted focus from game launches to recurring revenue driven by in-game purchases. In the past year, total unique accounts have grown to 540 million and monthly active users reached 180 million. “EA is likely to deliver faster net bookings and earnings growth in the next two years,” says Oppenheimer research analyst Martin Yang.
Roblox Corp. (RBLX)
Roblox is an online gaming platform that may boast the closest thing to a functioning metaverse. Its platform consists of Roblox Client, which allows users to explore 3D digital worlds; Roblox Studio, which allows users to create 3D experiences accessed through Roblox Client; and Roblox Cloud, which includes the infrastructure that powers the system. While the metaverse is still in its early stages of development, “Roblox is the category leader and is concretely demonstrating for customers, developers and merchants what the term means,” says Bank of America research analyst Omar Dessouky. While Roblox has yet to turn a profit, revenue increased 108% year over year in 2021 to $1.9 billion and hours engaged increased 35% year over year. “We believe Roblox clearly leads the field in the implementation and commercialization of the human co-experience compared to media industry incumbents, many of whom will attempt to reinvent themselves as metaverse companies,” Dessouky says.
The 7 best metaverse stocks to buy now:
— Autodesk Inc. (ADSK)
— Shopify Inc. (SHOP)
— Match Group Inc. (MTCH)
— Nvidia Corp. (NVDA)
— Meta Platforms Inc. (FB)
— Electronic Arts Inc. (EA)
— Roblox Corp. (RBLX)
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The 7 Best Metaverse Stocks to Buy Now originally appeared on usnews.com
Update 03/15/22: This story was published at an earlier date and has been updated with new information.
