Matterport (NASDAQ:MTTR) stock is one of the many “metaverse stocks” that have captured the fancy of investors.
Although the company has been in existence for 10 years, MTTR stock didn’t begin to trade publicly until 2021. And like many companies, Matterport went public via a special purpose acquisition company (SPAC).
What separated Matterport from some of the recent SPAC companies is that Matterport was not a pre-revenue company. In fact, it’s bullish revenue forecasts that excites some analysts and investors. However, the company is not yet profitable.
With the market in the early stages of what feels like it could be a deep sell-off, Matterport bulls may need a, pardon the pun, reality check.
A Real Life War of the Worlds
I don’t question the premise laid out by InvestorPlace contributor Ashley Cassell. Cassell wrote recently that Matterport is the “gateway to the metaverse” and the company’s library of “digital twins” is at the heart of its first mover advantage. I can’t open my e-mail these days without having one expert or another announce why the metaverse is the next big thing.
But here in the real world, Matterport stock is having a miserable time. In the last week, MTTR stock is down 22%. For the last month, it’s down 55%. And when you pull back to when the stock began trading publicly in July, the stock is down 28%.
When I wrote about Matterport having an elevator pitch; that’s not the elevator I had in mind.
A Range of Outcomes
Matterhorn is in the early stages of capturing a significant chunk of what it believes can be a $240 billion market. And to support that narrative, Matterport can point to increasing subscription revenues which grew 36% during the third quarter.
However, that subscription revenue comes in at $16 million. And the company is only forecasting about $109 million in full-year revenue this year. All of a sudden, the top line doesn’t sound quite as impressive. As Muslim Farooque wrote for InvestorPlace, “Matterport’s product has genuine demand but is nowhere near what its shareholders hoped for.”
And as I wrote in December, that assumes the metaverse rolls out as expected. And with tech stocks under pressure from what will likely be larger costs of borrowing to fund growth, the build-out of the metaverse is likely to slow down.
Now keep in mind, I’m not being the guy saying that the metaverse will come to a halt. But when the market has a pullback, many companies become more judicious about how they deploy capital. And while many companies may see a benefit for having a metaverse presence, the question will be how much will they be willing to spend to make that presence a reality?
MTTR Stock Remains a Speculative Stock
Despite what you may believe is a bearish take, I still think Matterport is an intriguing play on a digital, virtual future. The company’s partnership with Meta Platforms (NASDAQ:FB) is reason enough to have the company on your watchlist at least.
So if you were bullish about Matterport before, there’s no reason for you to not remain bullish. The trick now is for you to manage your expectations. For a long time, too long in my estimation, valuation hasn’t mattered to investors. And that was particularly true of growth stocks.
But investors may look back on December 2021 and say wistfully “that was then.” In the next few months, companies will likely have to work harder to impress institutional investors. Matterport has already lowered its revenue forecast once. It’s fair for investors to wonder if the current state of the market may make analysts rethink their forecast of $160 million in revenue for Matterport in 2022.
Matterport looks like a long-term winner. But right now, it’s best to only invest the money you can absolutely afford to lose. Because any losses you suffer will be real, not virtual.
On the date of publication, Chris Markoch 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.
Chris Markoch is a freelance financial copywriter who has been covering the market for eight years. He has been writing for InvestorPlace since 2019.
