Matterport (NASDAQ:MTTR) stock has been picked up, chewed up and now spat out by hype over the metaverse.
The company does data spatial analysis. It uses drones and cameras to capture data about a space, like an apartment block or office building. This helps the owners rent and redesign the space remotely, without clients having to see it. Matterport is based in Silicon Valley and now operates in 152 cities, in seven countries.
In addition to collecting data on real estate, Matterport is burning cash. It reported losses of $168 million and revenue of $27.6 million in September. The financial results, however, have nothing to do with MTTR stock’s value.
Matterport is all about the metaverse.
MTTR Stock: Real Places in Phony Worlds
The long-term idea is that, by having complete digital files on real places, Matterport can host real places in the artificial world of the metaverse. The short-term idea is that real estate companies can use Matterport data to rent, sell and outfit apartments and offices sight unseen.
Matterport came public in July through a SPAC, Gores Holdings VI. At one point in November it was trading at over $32 per share. After the latest tech wreck, it opened Feb. 15 at about $8.
The bullish case is that digitizing all the world’s buildings is worth $240 billion. Even getting 1% of them would be worth $2.4 billion. A recent deal with Midlands Holdings in Hong Kong shows what’s possible. Midlands will use Matterport data to create a Virtual Reality service for clients, allowing its apartments to be staged, with furniture, and bought with a single click.
Matterport is currently selling general access to the data under a Software as a Service (SaaS) model. It had been offering the data only on a licensing model, mainly to building owners and market participants. Deutsche Bank, which has a buy rating on the stock, believes network effects will accelerate the industry’s take-up of the data.
The more spaces Matterport digitizes, according to this theory, the more valuable the database becomes. Matterport estimates it has 250,000 subscribers to the data, which includes free users, and maps of 15 billion square feet of space.
The Reality Behind Matterport
The potential is enormous. The reality is something else.
Matterport reported results for the December quarter on Feb. 16. The company reported weaker-than-expected guidance, which is a large part of why MTTR stock tumbled nearly 20% the following day. That’s not what investors want to see right now.
Most of the recent action in Matterport stock involves external events, metaverse hype coming up against rising interest rates. Our Thomas Niel says he has been bearish on the stock, but not on the company. There are just six analysts covering Matterport stock at Tipranks, but all six are telling clients to buy it.
Bottom Line on MTTR Stock
Even if you buy Matterport near the current lows, you’re buying its potential, not its reality.
We’re talking $2 billion in market cap for a company that’s doing $100 million in business each year, and losing twice as much money as it takes in.
The potential is that the growing database will bring in recurring SaaS revenue, which then increases demand for spatial analysis and creates a virtuous cycle of growth.
Investors like Josh Brown, who has been buying the stock and is puzzled by its fall, are not stupid. The idea of selling and outfitting real estate remotely makes sense, especially in high-cost markets like New York.
But a digital version of a place isn’t the real place. Real estate is about location, and an internal map doesn’t tell you about the surrounding environment. Matterport is a long-term play. Don’t touch it until you’re certain it has bottomed, and only bet money you can afford to lose.
On the date of publication, Dana Blankenhorn held no position in any stock mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at email@example.com, tweet him at @danablankenhorn, or subscribe to his Substack.