Matterport (NASDAQ:MTTR) is a very interesting 3D spatial data and augmented reality/virtual reality (AR/VR) company whose stock is cheap. For example, MTTR stock has recently fallen from a peak price of $33.05 on Nov. 29 to just $21.24 today. That $11.81 drop represents a fall of over 35% from its peak in just over two weeks.
It’s always possible that MTTR stock could keep dropping. But it looks like now could be a good time to begin taking a position in this spatial data company.
The stock looks like a bargain now that it is so far down from its peak. If it continues to drop, value-oriented investors might be interested in beginning to accumulate positions. This article will help explain why.
Where Things Stand at Matterport
One reason for the drop is the fact that the company lowered its revenue outlook for the year to a range of $107 million to $110 million. This is down around 15% from previous estimates for sales between $120 million and $126 million.
However, we should keep things in proper perspective. Its growth rate next year will still be quite exceptional.
For example, at this point, even after lower expectations, analysts forecast $160 million in sales for 2022. This is based on Seeking Alpha’s survey of five Wall Street analysts that cover MTTR stock. That represents a huge 45% sales increase. That is, it’s 45% even over the top end of the range for 2021 (i.e., $110 million).
Expect lots of growth from Matterport. You can read about some of the interesting uses of its AR/VR technology in a recent Seeking Alpha article by Star Investments. It lays out the many uses of Matterport’s spatial data AR/VR technology in insurance, real estate, and other industries.
What is clear though is that the drop in the revenue growth rate is the company’s transition to a subscription model. Up until recently, it offered a sales approach of a one-off payment for its services. Now its products are available for free under a freemium/premium subscription model.
This was the case with Adobe (NASDAQ:ADBE) which converted to a subscription model over several years. It also hurt their revenue growth rates during the transition.
What to do With MTTR Stock
As its stands, at today’s price, MTTR stock is not that cheap. For example, since its market capitalization is $5.21 billion and analysts forecast $109.17 million in sales, its price-to-sales (P/S) multiple is 52.8 times sales. Moreover, since analysts forecast 2022 sales to reach $160 million, so its P/S ratio falls to 36 times.
However, given the company’s fast growth prospects, analysts foresee huge gains in sales in the coming years. For example, Seeking Alpha shows that the average analyst estimate for 2023 is $262.5 million. This puts MTTR stock on a forward P/S multiple of just 22 times. That does not make the stock appear as high a valuation as before.
The valuation is not as clear on a price-to-earnings, especially since analysts do not expect the company to become profitable before 2024.
Nevertheless, given Matterport’s huge growth rate and the many new uses for its AR/VR spatial data technology, MTTR stock is now is buyable territory.
That is not to say it is a bargain just yet. But those who own the stock now might have the chance to intelligently lower their average cost. And it’s always a good thing to lower your average cost. I have a general rule to lower my cost in stock or crypto whenever I have a 20% or more downdraft from my original purchase. Given how far the stock has fallen, this may be the case for a good many of the stock’s original investors.
On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Mark Hake writes about personal finance at mrhake.medium.com and Newsbreak.com and runs the Total Yield Value Guide which you can review here.
