By now, even the most casual investor has become aware of the newest hot investing niche: The metaverse. It has long been speculated that metaverse growth will prompt early, speculative capital to flood into the sector en masse. The general notion was that it was more a question of when, not if, metaverse stocks would catch on.
It was an Oct. 28 announcement that galvanized that momentum to new heights. And now here we are, in late January talking about metaverse stocks that forward-thinking investors need to know about.
Investors want to know more about companies with an early edge in the sector. And generally, they just want to understand the metaverse itself more completely. I’ll add a caveat: No one knows where metaverse stocks are going as of now. They are very analogous to EV stocks in 2021. They’re very likely to follow a similar path and gain an increasing share of attention. So, pay attention to valuation as they catch on.
That word of caution aside, let’s jump into the leading names in the emerging metaverse space.
- Meta Platforms (NASDAQ:FB)
- Roblox (NYSE:RBLX)
- Matterport (NASDAQ:MTTR)
- Nvidia (NASDAQ:NVDA)
- Unity Software (NYSE:U)
- Autodesk (NASDAQ:ADSK)
- Microsoft (NASDAQ:MSFT)
Metaverse Stocks for Future-Thinking Investors: Meta Platforms (FB)
When Meta Platforms last announced earnings on Oct. 25 it was still known as Facebook. The company continued to perform exceptionally well. Revenues, driven by advertising, increased at an impressive rate, while net income growth also grew, albeit somewhat slower. The market dinged Facebook slightly, but it was really more because of the success investors have come to expect from the tech giant.
A few days later Facebook CEO Mark Zuckerberg introduced Meta at a conference called Connect 21. The explicit purpose was to bring the metaverse to life. That prompted questions about what the metaverse is. And the company’s explanation of the metaverse is a clear one: “The metaverse will feel like a hybrid of today’s online social experiences, sometimes expanded into three dimensions or projected into the physical world. It will let you share immersive experiences with other people even when you can’t be together — and do things together you couldn’t do in the physical world.”
There’s a lot one could say about that previous snippet. Reactions run the gamut. Taking the moderate view, one thing becomes very clear: Meta Platforms will play a large role in the metaverse if it has its way. The pivot is a clear sign it remains a central figure to watch.
In my opinion, Roblox is one of the most interesting stocks for providing insight into the metaverse. From a 10,000 foot view, Roblox is a platform that allows users to create and interact in multiple virtual worlds. These games have an in-game currency called Robux, which is used to purchase virtual goods.
So, it truly goes to show the commercial applicability behind why the metaverse has so many excited. There are developers who have created worlds from which they can extract Robux, which can then be exchanged into real currencies. Young developers — the user base skews young — have created commerce machines in the Roblox ecosystem. They will gain notoriety and riches moving forward.
It’s a difficult concept to grasp in some sense. Many question why anyone would spend money on digital goods. After all, a digital Gucci bag isn’t the same thing as a real one, right? Well, no one really knows right now.
I’m not creating a hypothetical use case when I refer to Gucci of course. Instead I’m referring to Gucci Garden. It was an event that ran between May 17 and May 31, 2021. Gucci branded digital items were one sale for Robux during the event. Reactions were mixed, but it suggests monetization of the metaverse is far from a pipe dream.
Metaverse Stocks for Future-Thinking Investors: Matterport (MTTR)
The metaverse will incorporate many facets of the real world. And there are multiple ways to approach any potential investment in the metaverse. Hardware, software, and development of metaverse spaces to name a few. Another avenue is real estate. But how might that play out? Investors can’t buy physical homes or offices in a digital world per se. But Matterport offers a service that touches on the intersection of real estate and the metaverse.
The company is focused on creating digital copies of real world places and objects, which it calls digital twins. So, if you desire to walk around a dimensionally accurate digital New York City you will be able to.
The firm sees the commercial value thusly: “A Matterport digital twin is the most accurate virtual 3D model of a real place – whether it be a room, an entire building, or an outdoor space. Digital twins enable industries like real estate, hospitality, construction, and insurance to simplify how they work and connect with customers and vendors.”
Matterport isn’t experiencing a strong period currently, however. Yet, many see its potential as too good to pass up at current prices. They don’t believe that the firm’s previously reduced revenue outlook much matters in the grander scheme of things.
Nvidia is already one of the most heralded and recommended stocks there is. Wall Street remains high on Nvidia for multiple reasons. The semiconductor firm touches on gaming, crypto, data center, automobiles and the metaverse among many others.
In fact, Bank of America (NYSE:BAC) recently named it as its best semiconductor stock. BoA analyst Vivek Arya had this to say following an interview with Nvidia’s CFO: “We continue to believe the company is best positioned to address several of the most important, multi-decade secular growth opportunities with its unique, highly-leverageable accelerated compute platform.”
Nvidia’s approach to the metaverse is its Omniverse Platform. It offers a lot of the same things many other early metaverse plays do: An open platform for virtual collaboration and physically accurate simulations. It includes things like digital twins and avatars. Clearly firms including Matterport aren’t playing alone in developing exclusive niches of the metaverse. Nvidia will be there. It’s attractive for a multitude of reasons, not least of which is projected growth.
Metaverse Stocks for Future-Thinking Investors: Unity Software (U)
Unity Software might not be a household name like some of the other stocks on this list. But if you or someone you know is a gamer, Unity Software has likely touched your life. That’s because Unity Software is utilized in 71% of the top 1,000 games. More than 50% of mobile, PC, and console games were made with Unity. So, despite its relatively lesser known name, it is ubiquitous.
The company’s software is highly leveraged in building current 2D and 3D gaming worlds. It is then very likely that the company will carve out a significant role in the metaverse.
Unity Software also recently acquired Weta Digital back in December. That acquisition was done with the metaverse in mind: “Weta’s incredibly exclusive and sophisticated visual effects (VFX) tools into the hands of millions of creators and artists around the world, and once integrated onto the Unity platform, enable the next generation of RT3D creativity and shape the future of the metaverse.” It certainly makes Unity a company worth paying attention to as the metaverse evolves.
Autodesk stock is one with strong potential based on its average target price. It currently trades near $230, but the 20+ analysts with coverage collectively agree that it could move to nearly $330.
That’s nice to know in general, but it does little to help us understand what Autodesk has to do with the metaverse. Perhaps that’s because of the company’s name. If the ‘auto’ in Autodesk’s name conjured up images of the automotive industry, you wouldn’t be alone. But the company actually deals with AutoCAD design, in other words computer aided design.
Autodesk is a standard bearer in the CAD world. Historically that has meant that developers use the software to create renderings for building, infrastructural and construction projects. But developers are venturing into gaming , entertainment and the metaverse leveraging Autodesk.
ADSK stock decreased in dramatic fashion back in November. Strong earnings surpassed expectations. That generally translates to increasing stock prices. However, the firm also provided guidance that disappointed Wall Street at the same time. Prices fell from $330 down to $250 quickly.
A contrarian move would be to simply ignore the bearish take, and consider ADSK stock in light of metaverse considerations.
Metaverse Stocks for Future-Thinking Investors: Microsoft (MSFT)
Last but not least on this list is Microsoft. Facebook might have been the first, and most vocal tech giant to embrace the metaverse, but it would be foolish to assume it is the only one.
The most important metaverse news for Microsoft is its $75 billion acquisition of Activision Blizzard (NASDAQ:ATVI). Microsoft let its reasoning be known: It is a pathway to the metaverse. If video games are to be an entry into the metaverse as many analysts expect, Activision Blizzard is a logical purchase.
The executives from both companies were explicitly implying that is the case. They mentioned metaverse multiple times while announcing the acquisition.
No one knows much about what the acquisition means for the metaverse in the longer term, but that’s not the point. It’s a greater signal that another of the tech giants appreciate the magnitude of the metaverse moving forward.
On the date of publication, Alex Sirois did not have (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.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.