VR is the gateway to the metaverse’s profit potential.
The metaverse’s global market could reach $1.6 trillion by 2030, according to research firm Market Data Centre. Compare that estimate with its $62.1 billion market in 2021, and the metaverse has a projected compound annual growth rate, or CAGR, of more than 45% over the next eight years. “Virtual reality will be the primary access point for the metaverse, as it will be the most immersive way to interact with virtual worlds and the users that inhabit them,” says Mario Stefanidis, vice president of research at Roundhill Investments. Obviously, this means VR has tremendous potential into the future. Investors “aren’t particularly excited about VR yet because it is very early,” says Matt Drukker, portfolio manager and research analyst at Fidelity Investments. But for some investors, “very early” might be the perfect time to start looking for prospects in a given industry. Here are seven of the best virtual reality stocks to buy right now.
Meta Platforms Inc. (ticker: META)
Any discussion of virtual reality needs to start with Meta Platforms, formerly known as Facebook. The company has already invested more than $10 billion in the metaverse, of which virtual reality is the main component. It bought Oculus in 2014. And Oculus’ (rebranded as Meta’s) Quest 2 headset was the best-selling VR headset of 2021, shipping more than 8.7 million units. As the leader in VR platforms, Meta has already built a sizable lead in both bringing VR to the masses and monetizing it. Of course, this doesn’t discount the many regulatory headwinds that Meta, along with the rest of Big Tech, has been facing lately. Not to mention its declining Facebook user base, which could wind up decreasing the ad revenue Meta needs to reinvest back into VR. However, the 56 analysts surveyed by financial data provider Koyfin still consider Meta an overall “strong buy.” Meta is down 52% this year as of June 16, but it has been chipping away at those losses over the last few months.
Microsoft Corp. (MSFT)
Microsoft made a name for itself all the way back in the 1990s, at the start of the internet revolution, with its Windows operating system. But more recently, with a $68.7 billion purchase of Activision Blizzard Inc. (ATVI) expected to be finalized in June 2023, the company has announced its intention to compete in the metaverse, and hence the world of VR. Activision isn’t yet considered a major player in the metaverse per se, but it is a gaming company already making inroads into the VR market and MSFT itself has framed the pending acquisition as a metaverse play. Of course, Microsoft has also dipped its toes into VR platforms with the Hololens 2 augmented reality headset. The ATVI acquisition could help push that technology even further ahead of competitors. The 47 analysts surveyed by Koyfin give MSFT a “strong buy” rating on average, and unlike Meta, it pays a 1% dividend yield.
Apple Inc. (AAPL)
The world knows Apple is working on a VR headset, a highly anticipated product from a global technology leader. However, nobody knows quite what this headset will be. It’s been speculated that the release date could be pushed to 2023, and that the headset could run as much as $3,000 per unit. That would make it considerably more expensive than Meta’s Quest 2 headset, which runs consumers $299 to $399 per unit. The answer to how Apple believes it can compete at this price point remains to be seen. But Apple has continuously charged more for its MacBooks and iPhones than its competitors charge for comparable products, and it appears to be banking on the same brand recognition and customer loyalty for its VR headsets. Luke Hallard, lead advisor at stock research service 7investing, believes Apple “could be an exciting player in the space.” AAPL beat estimates for earnings per share for two consecutive fiscal quarters, with a revenue surprise of $3.3 billion in the last quarter. Plus, the 44 analysts surveyed by Koyfin give AAPL an overall “strong buy” rating.
Nvidia Corp. (NVDA)
Nvidia’s graphics processing units, or GPUs, deliver the kind of high-quality graphics that could make VR extremely compelling. That’s because the GPUs that Nvidia creates could be precisely what will drive VR’s reality-based graphics simulations. Simon Erickson, founder and CEO at 7investing, says Nvidia is VR’s “picks and shovels play.” Of course, VR aside, Nvidia is a powerhouse. The company’s GPUs currently account for more than 83% of market share. This is considerably more than competitor Advanced Micro Devices Inc. (AMD), which holds a mere 17% of market share. NVDA’s stock is up more than 300% during the past five years as of June 16, and that’s with a 47% loss year to date. Of course, there are many other reasons to own NVDA, including its involvement in cutting-edge industries such as artificial intelligence, autonomous vehicles and more. Investors can simply add virtual reality to NVDA’s already-compelling investment case. The 43 analysts surveyed by Koyfin rate NVDA a “strong buy,” on average.
Roblox Corp. (RBLX)
With over half of American children already on its platform, Roblox is well on its way to becoming the leading builder of metaverse and virtual reality applications. For investors unfamiliar with Roblox, the company offers a free tool set to let developers build their own games. And like its major competitor, Microsoft’s Minecraft franchise, Roblox allows its users to build VR games as well. This makes them both pioneers in VR gaming development. However, with more than 100 million active monthly users, Roblox is slightly more popular than Minecraft. This isn’t surprising, considering Minecraft has been playing catch-up ever since it came to market three years after its rival. In its fiscal 2021, Roblox posted a 108% year-over-year increase in revenue, to $1.9 billion. First-quarter 2022 revenue showed a 39% gain over the first quarter of 2021. And 20 analysts surveyed by Koyfin rate RBLX a “buy” overall.
Unity Software Inc. (U)
Like Roblox, Unity Software is creating virtual reality games that let players compete in real time. However, while Roblox is building communities with user-generated content, which could serve the company well as the children and teenagers who use it grow older, Unity Software is building the metaverse’s architecture with the help of professional designers and games. This includes many already-successful titles, including augmented reality game Pokemon Go. This strategy is paying off well for Unity. The company saw year-over-year revenue growth of 44% in 2021, and in the first quarter of this year reported record quarterly revenue, up 36% compared with the first quarter of 2021. Unity Software made its initial public offering, or IPO, in September 2020, six months before RBLX’s public debut in March 2021. The stock has lost about 50% since then, as of June 16. However, the 19 analysts surveyed by Koyfin still rate U an overall “buy,” given the momentum behind this late bloomer.
Matterport Inc. (MTTR)
With a mere $1 billion market cap, spatial data firm Matterport is by far the smallest company covered on this list. However, what Matterport lacks in size it makes up for in potential. The stock only recently went public by merging with a special-purpose acquisition company, or SPAC, in July 2021. But it has seen impressive revenue growth since then, and it reported a 70% increase in total subscribers year over year in the first quarter of 2022. Matterport designs digital twins, which means it uses 3D cameras and other technology to reproduce replicas of the physical world in virtual worlds. In the years to come, this tech could become a big part of the metaverse and virtual reality in general. MTTR has lost about 73% since its IPO as of June 16, but that didn’t stop the seven analysts surveyed by Koyfin from giving the stock an average rating of “buy.” In fact, they foresee a 134% return potential for MTTR over the next 12 months.
7 best virtual reality stocks to buy now:
— Meta Platforms Inc. (META)
— Microsoft Corp. (MSFT)
— Apple Inc. (AAPL)
— Nvidia Corp. (NVDA)
— Roblox Corp. (RBLX)
— Unity Software Inc. (U)
— Matterport Inc. (MTTR)
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Update 06/17/22: This story was published at an earlier date and has been updated with new information.