The metaverse is, quite simply, an entirely virtual world in which a large number of participants can gather to work or play. The concept was once only found in science fiction, but has taken off in recent years. As a result, many investors are looking for metaverse stocks to play the trend.
I remember writing about metaverse companies decades ago, and they never really took off. But since then, the industry has seen tremendous advances in artificial intelligence, computer graphics, virtual reality (VR) and augmented reality (AR) technology. With the support of two huge tech companies, the metaverse concept can become very successful within the next few years.
Microsoft (NASDAQ:MSFT) says its cloud unit enables companies to use the metaverse to make predictions about initiatives they’re launching in the physical world. Facebook (NASDAQ:FB), meanwhile, seems intent on building a social and e-commerce-oriented metaverse.
New technologies are making these virtual worlds more appealing than ever. With Facebook and Microsoft ready to use their considerable clout to promote them, the metaverse should take off sooner rather than later.
I think it’s too early to say whether metaverses will meaningfully move the needle for Facebook and Microsoft. Therefore, I don’t see them as a good way to play the trend at this point. Instead, tech-oriented investors should consider buying these three metaverse stocks:
Metaverse Stocks: Roblox (RBLX)
Roblox’s ultimate goal is to become a metaverse platform. The company already offers many virtual reality games. That leaves the door wide open for the company to lead the charge into the metaverse space.
Matthew Ball, a writer and investor who specializes in metaverse tech, says these virtual worlds consist of “persistent, interconnected, virtual simulations.”
What’s more, the company is clearly focused on the metaverse concept. Roblox CEO David Baszucki said in February, “We’re shepherds of the Metaverse.” More recently, according to TheStreet, Baszucki said that its digital experiences would enable Roblox to expand for the next 15 years.
Additionally, Roblox’s core concept of allowing users to build customized roleplay games certainly is tailor-made for the metaverse.
Even as businesses reopened, Roblox’s daily active users climbed an impressive 29% year-over-year (YOY) in the second quarter to a record 43.2 million. The company’s bookings jumped 35% YOY to $665.5 milli0n and its net cash from operations soared 64% to $191.2 million.
The data indicates that many gamers love Roblox and the company is able to effectively monetize its offerings.
Unity Software (U)
Unity is a software provider that helps developers create, run and monetize games and content on a variety of platforms, ranging from phones and consoles to PCs and VR. The company’s tech supports 2D and 3D gaming elements.
Unity is well-known for its game engine, which has been used in several high-profile releases. Its tech is incredibly versatile; games built on Unity’s engine range from first-person shooters and role-playing games (RPGs) to puzzle and adventure titles.
Since the metaverse uses real-time 2D and 3D content along with augmented and virtual reality, Unity is well-positioned to benefit from the proliferation of the metaverse.
Analysts say that Unity is on the path to profitability and they are upbeat about its expansion beyond games, according to Investor’s Business Daily. The publication recently named Unity as its stock of the day.
The software maker recently reported impressive beat-and-raise Q2 results, as its sales soared 48% YOY.
Metaverse Stocks: Zynga (ZNGA)
Ball, the metaverse expert, has called the concept “a quasi-successor state to today’s mobile internet.” So Zynga, the leader in mobile games, is poised to become a highly successful metaverse player.
Zynga has several successful mobile games under its belt, including Zynga Poker and Words With Friends. In February, its game High Heels! was one of the most-downloaded apps in the U.S. The company is a mobile gaming powerhouse, which should help its metaverse content dominate the market.
Similarly, the company is trying to make its games playable across many platforms. This combined with its partnership with Snap (NYSE:SNAP) should enable Zynga to make its metaverses very popular.
What’s more, the company has long utilized augmented reality. CEO Frank Gibeau has been upbeat on the AR opportunity for some time. Meanwhile, the company is making many acquisitions, while two of its alumni are launching a VR gaming company. There’s a good chance that Zynga will eventually buy that company, giving it a beachhead in the VR race.
On the date of publication, Larry Ramer held a long position in SNAP stock.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.
