Matterport (NASDAQ:MTTR), a 3D spatial data and augmented reality/virtual reality (AR/VR) company, is looking very cheap given its recent declines. MTTR stock has dropped from a peak of $33.05 on Nov. 29 to just $11.91 as of Jan. 19, 2022.
That huge drop of $21.14 represents a decline of 64% from its peak in just over two weeks. Moreover, since the end of 2021, when the stock was at $20.64, it is now down $8.73 per MTTR stock. That represents a decline of 42.3% year-to-date (YTD) already.
That is not a good situation to be in for most investors. However, it also represents a potential buying opportunity for value investors. Granted, it’s always possible that MTTR stock could keep falling, but, on balance, it could be an opportunity to average down into the stock.
Where Things Stand With MTTR Stock
The reason the stock is down is likely due to the company’s lowered revenue outlook for the full year 2021. Prior to the downgrade, Matterport was looking for sales between $120 million and $126 million. But now, with the release of its Q3 earnings report on Nov. 3, the company is looking for sales for the year to be in the range of $107 to $110 million.
However, it’s important to note that the company is still expected to grow quite significantly over the next several years. For example, analysts surveyed by Seeking Alpha have an average forecast of $160 million for 2022.
This represents a huge growth rate of 46.6% over their average projected revenue of $109.17 million for 2021.
And on top of that analysts foresee revenue of $286.87 million for 2023. This represents a growth rate of 79% over forecast 2022 revenue. Moreover, by Q4 2023, they forecast revenue of $79.29 million. That puts it on a run-rate (as if there would be no growth going forward) of $317.2 million.
Where This Leaves Matterport’s Valuation
MTTR stock now has a market value of about $3 billion ($2.99 billion, according to Yahoo! Finance). Thus, given its growth rate this year and next the stock could be seen as not that expensive.
For example, using the price-of-sales (P/S) multiple for 2022, it’s at 18.7 times sales (i.e., $2.99b/$160m). And for 2023 its P/S ratio is just 10.4 times sales (i.e., $2.99b/$286.87m). And it is lower than that on a run-rate basis.
Nevertheless, the market may not yet believe in the company’s potential growth horizon as portrayed by analysts. For example, it could be that, since the company is not yet profitable, the market is not willing to grant it a 10 times P/S multiple on 2023 future revenue forecasts.
Even if that is the case, I suspect that the stock is probably nearing the point where its growth rate is not adequately priced in the stock. However, investors should keep this in mind. Matterport makes revenue by selling subscriptions to its spatial data platform and special services. These subscriptions tend to be sticky with customers, and that is worth a lot to investors over the long term.
What to Do With MTTR Stock
MTTR stock is definitely an investment for the long term and investors should consider averaging down into it. Those that should do this are those that have losses or the stock is not that big a position in their overall portfolio.
As a result, this will tend to help the investors keep a long-term perspective. The stock price decline at this point probably does not reflect the growth in the underlying value of the company. It is likely just a reaction to a huge runup and a reduction in valuation, not a concern that the company’s long-term future is in doubt.
As one analyst put it, it looks like a case of “near term pain for long term gain,” as the company builds out its subscription sales.
On the date of publication, Mark R. Hake did not hold any position (either directly or indirectly) 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 on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.
