Recent analysis suggests that the global augmented and virtual reality market will reach nearly 100 million annual units sold during 2021. For perspective, less than 10 million units were sold during 2016, meaning the space will grow at a CAGR of more than 57%. It’s an explosive industry, sure, but ask someone to name the top virtual or augmented reality stocks available today and you’ll no doubt get the same standard response — Facebook Inc (NASDAQ:FB) and Sony Corp (ADR) (NYSE:SNE).
Facebook’s Oculus Rift has having sold just shy of 250,000 units by the end of 2016, and Sony just announced that it has topped 1 million sales of PlayStation VR. Both companies are indeed some of the front runners in the space, pioneering what amounts to a brand new industry and doing so with some degree of success.
These aren’t the only exposures available to an investor looking to get in on the action, however.
Here are three companies set to benefit from the growth of the VR/AR market, none of which are Facebook or Sony.
Virtual Reality Stocks to Buy: HTC Corp
HTC Corp hasn’t had exactly the best year. On the Taiwan Stock Exchange, the company is down more than 80% over the past five years and just shy of 10% year to date.
It’s struggled to keep up with rivals Samsung Electronics (OTCMKTS:SSNLF) and Apple Inc. (NASDAQ:AAPL) in the mobile device arena and many expected it to do the same in the VR space, with Facebook and Sony seeming to take early leads in the sector.
Recently, however, these expectations have proven invalid. HTC’s flagship VR unit is called Vive and the company has spent the past year or so working to push Vive in a slightly different direction than that of its core competitors. This push has taken it into areas that could be incredibly lucrative and in which the company might experience a slightly reduced degree of competitive pressure.
The first expansion strategy is rooted in what HTC calls its Viveport Program. One iteration of the program is called Viveland, which are arcade type locations where individuals can gain paid access to a variety of virtual reality games served through the Vive headset. Think of it as a standard games arcade, but instead of the usual bulky machines, users slip on a headset, insert a quarter and start gaming.
There’s also a program allowing more traditional recreational industry locations — movie theaters, fast food restaurants, internet cafes, that sort of thing — to license the hardware and set up a Vive VR system for commercial use. HTC has focused on China so far with its Viveland location rollout, but expects to expand into the U.S. and Europe before the end of 2017.
The second strategy is an incubator type approach, through which the company is seeking to foster the development of startups that employ the technology of Vive to underpin their operational strategies. There’s an accelerator program with a deadline of Aug. 15, called Vive X, through which HTC intends to identify and fund VR startups.
As this program matures, we could (should) see an expansion in the commercial side of the Vive technology and — in turn — an added revenue stream to bolster the consumer sales side of HTC’s top line.
Virtual Reality Stocks to Buy: Vuzix (VUZI)
Sticking with the commercial side of the industry, let’s look at Vuzix Corporation (NASDAQ:VUZI). This one is a U.S.-based hardware designer/manufacturer with a primary focus on augmented reality. This side of the industry may not be grabbing headlines as frequently as its virtual realty counterpart, but there’s no shortage of opportunity here.
Indeed, augmented reality tech will outpace virtual reality in terms of units sold for commercial application, with 20 million commercial use AR headsets set to sell in 2021 versus 18 million VR headsets in the same side of the space. Vuzix is attempting to capitalize on this trend, and to that aim, just made its flagship M300 smart glasses available for sale globally. This system is an upgraded version of the company’s previous flagship, and the M300’s predecessor, the M100, which is a sort of AR glasses type system not dissimilar to Alphabet Inc (NASDAQ:GOOGL) Google Glass device.
That is to say, not dissimilar in design, but far superior in terms of strategic execution from a rollout perspective. Whereas Google failed to find a consumer-based market for its Google Glass device, and with the failure primarily based on privacy concerns and the stigma associated with ownership that resulted from these concerns, Vuzix went after the commercial application market and scored big.
The M100 employed an Android operating system and allows for all of the standard operations you’d look for from this sort of device — video recording, photo taking, audio capture, internet access, communication — but geared toward use in, for example, a warehouse setting. Certain applications could use the camera to keep track of inventory and sync with a central database. For a warehouse worker that wants to feed back stock and availability data to HQ, as an example, the automation of this process through AR glasses is incredibly useful.
That’s just one example of many, of course, Vuzix has reported the use of its products in a variety of settings, from industrial to education to healthcare. So the latest device, the M300, has a few added extras to boost specifications when compared to the M100, but more importantly, is open to a developer framework. It’s here where third party developers can produce applications that run on the device and are geared toward commercial application. Think of it as a sort of App Store, but for augmented reality.
Virtual Reality Stocks to Buy: IMAX (IMAX), AMC (AMC)
Okay, so this one is technically two companies, but they are spearheading a very much intertwined strategy in the virtual and augmented reality space, so it’s tough to highlight one without the other.
In June, Imax Corp (USA) (NYSE:IMAX) and AMC Entertainment Holdings Inc (NYSE:AMC) teamed up to open the first ever IMAX VR center in New York City. It’s located at AMC Kips Bay and it’s a VR arcade-type experience (centered more around consumable content as opposed to gaming) that reportedly delivers to guests immersive, multi-dimensional virtual reality experiences, including movie entertainment content and other media.
Note that this is the first ever center of its type in New York City, but it actually makes for the second of this sort of center in the U.S., with the first having launched earlier this year in Los Angeles. The latter, the LA center, is an IMAX-only effort, with AMC not a part of the fold at that location. With the latest opening billed by both sides as an expansion of the existing partnership between IMAX and AMC, however, it looks as though (and very much stands to reason that) IMAX intends to push forward with its VR center strategy in partnership with the movie theater chain.
From a technological perspective, the experience is rooted in what IMAX calls “Pods,” designed to allow multiple users to interact within a virtual environment. As per the partnership, terms are undisclosed, but we know that IMAX is providing the content (a steady stream of fresh content weekly, averaging around 10-15 minutes in length) and AMC is providing the real estate, and initially, the customers.
We say “initially,” because right now the majority of the Pod users are going to be individuals that are at an AMC location to watch a movie and who decide to use IMAX’s technology as an add on to that primary experience. Longer term, however, there’s a good chance that individuals will start going to the AMC location with the sole remit of using the IMAX VR technology.
Ultimately, then, AMC could prove a real winner in an industry for which it’s not driving technological innovation, but instead acting as more of a retail location lease-type entity. As a final note, we know IMAX is taking this venture seriously. The company just reported the axing of 14% of its global workforce, with the proceeds saved on the HR trim earmarked to “line up more original content and VR.”
As of this writing, Samuel Rae did not hold a position in any of the aforementioned securities.