These are the top metaverse stocks to buy in 2022.
The metaverse is a digital place where users can meet each other in virtual reality to play games, socialize, collaborate and shop. The metaverse isn’t yet fully defined, with many companies and technologists working to turn the virtual reality concept into tangible applications and uses. Meta Platforms Inc. (ticker: FB) CEO Mark Zuckerberg made the metaverse a household word in late 2021, and there’s since been ample discussion and numerous advertisements on the subject. Yet, most of the companies engaged in the development of the metaverse have seen their share prices plunge in 2022. The bloom is off the rose, at least for the time being. However, that could create an opportunity for investors to take advantage. The concept of virtual and augmented reality hasn’t gone anywhere, and with growth stocks down sharply across the board, it could be a time for contrarianism. Here are seven metaverse stocks to buy for the back half of 2022.
Meta Platforms Inc. (FB)
Any discussion of metaverse stocks has to start here. Founder Zuckerberg changed the name of Facebook to Meta Platforms, after all, because he is so convinced that the metaverse will be the next chapter in his firm’s evolution. The market is highly skeptical of this, to put it mildly: FB stock is down about 46% year to date through May 24. For the foreseeable future, Meta will still earn most of its money from Instagram and its legacy Facebook product. Investors think Meta’s virtual reality plans aren’t wise. However, Zuckerberg’s previous capital allocation decisions, such as buying Instagram and WhatsApp, have been highly successful. For investors willing to bet on Zuckerberg again, FB stock looks compelling at less than 16 times this year’s estimated earnings.
Microsoft Corp. (MSFT)
Microsoft is another of the Big Tech giants with a significant metaverse angle. For one, Microsoft has its HoloLens headset. HoloLens is primarily a business product, as it sells for several thousand dollars and is designed to help with mixed-reality applications in settings such as factories, real estate, virtual communications and 3D printing. Over time, Microsoft may be able to broaden its virtual reality technology into its gaming division. Microsoft is already a leader in the console space, and it should further expand its gaming footprint with its pending acquisition of Activision Blizzard Inc. (ATVI). Microsoft is far from a pure play on the metaverse, but it should be able to earn a sizable amount of revenues out of the total metaverse pie as virtual reality and gaming applications further take off.
Unity Software Inc. (U)
Unity is the creator of one of the two major video game engines, with Unreal Engine being the primary competition. Unity allows game developers to produce high-quality graphical content that runs across all platforms including phones, consoles, laptops and virtual reality. Unity has an estimated 70% market share of the mobile gaming market today. Over time, Unity should be able to take its strong positioning in existing games and leverage that into success with the metaverse and other virtual and augmented reality applications. In addition to that, Unity is working on developing other uses for its graphics software, including video animation, architecture and e-commerce. For e-commerce, think of 3D models of a person’s body which make it easy to try on clothing or other accessories virtually and decide whether to buy or not. It’s still the early innings for this sort of technology, but Unity is one of the leaders in making it a reality.
Autodesk Inc. (ADSK)
Graphics software company Autodesk is far from a pure play on the metaverse. However, it’s already a large and strongly profitable company with a metaverse angle to provide further upside potential for the stock. Autodesk’s core product is software that gives advanced design tools to professionals. People such as architects use Autodesk to design layouts for buildings, factories, skyscrapers and so on. The factory angle is particularly interesting, as companies are increasingly using digital twins. A digital twin is a virtual re-creation of a physical object, such as a factory assembly line. Engineers can then experiment with the virtual object without taking any risk to the existing real-world setup. As these enhanced-reality applications take off, companies such as Autodesk, which create the underlying modeling software, should be poised for further growth.
Matterport Inc. (MTTR)
Matterport is another company that serves a similar role to Autodesk. Matterport’s unique service is to create an enhanced reality experience for real estate. Property owners buy specialized cameras from Matterport and upload high-definition photos of their building. Matterport creates a 3D representation of the space, then clients use this virtual model to run tours and conduct property showings, among other uses. This is integral for developing online real estate marketplaces. Particularly in a world of remote work, being able to view a property without actually going there in person can be an invaluable service. That said, Matterport has struggled to monetize its business so far. A switch toward a subscription business model hasn’t paid off as quickly as investors had hoped, leading to shares losing most of their value in recent months. However, the long-term business model seems promising, and if Matterport’s management can execute better, shares could be poised for a solid recovery.
Roblox Corp. (RBLX)
Roblox is a leading video game ecosystem. The company’s product is not just a game in and of itself, but rather a platform where users can design their own games and content within the broader Roblox universe. This has allowed Roblox to enjoy strong network effects as users like hanging out and trying each other’s concepts. The main limitations of Roblox are that it has a weak graphics engine, and that most of its consumers are kids or teenagers. Investors are skeptical of Roblox’s long-term value if it isn’t able to expand to a larger audience. That said, Roblox has a large, engaged community and should benefit from the metaverse; big brands are already paying to set up virtual advertising projects in the Roblox ecosystem. Down about 74% year to date through May 24, Roblox shares have fallen enough to become interesting to more risk-tolerant investors.
CrowdStrike Holdings Inc. (CRWD)
One other option to benefit from the metaverse and augmented reality is investing in cybersecurity stocks. As people put more of their lives and financial information into the digital world, the security of these virtual meeting places becomes ever more important. CrowdStrike is well positioned to prosper as more important activity happens in virtual spaces. CrowdStrike is one of the leading cybersecurity providers that was designed based on the cloud. Instead of building security for on-premises applications and then trying to pivot, CrowdStrike was created to serve the fastest-growing digital data markets out there today. Incredibly, CrowdStrike is still expected to grow its top line by 48% this year, making it one of the fastest-growing large cloud companies. With fiscal year 2023 revenues set to top $2 billion, CrowdStrike is a dominant player in security. As more and more metaverse applications go live, CrowdStrike will be there to help keep them safe and secure.
The 7 best metaverse stocks to buy now:
— Meta Platforms Inc. (FB)
— Microsoft Corp. (MSFT)
— Unity Software Inc. (U)
— Autodesk Inc. (ADSK)
— Matterport Inc. (MTTR)
— Roblox Corp. (RBLX)
— CrowdStrike Holdings Inc. (CRWD)
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Update 05/25/22: This story was published at an earlier date and has been updated with new information.