With so much analysis on Matterport (NASDAQ:MTTR) – most of it presumably negative based on the performance of MTTR stock – it may be helpful to start with the basics and work our way to deeper insights. So, what exactly does Matterport do?
Primarily, the company provides an all-in-one platform for 3D space capture. Rather than the flat two-dimensional images that people have been accustomed to seeing, Matterport actualizes immersive, panoramic photographs of indoor spaces. As a result, the company established the benchmark for dollhouse views of homes, condominiums and apartment buildings – among many other establishments that are difficult to capture using traditional imaging platforms.
Perhaps the best way to demonstrate the power of Matterport is to view Matterport-enabled images in the residential property sector versus similar advertisements you might find on Craigslist. Typically, the latter features a series of still images – probably taken by phone – whereas the former presents an immersive, interactive environment.
In short, Matterport allows users to understand what a particular space will really look like without actually being there. It’s had hugely positive implications during the worst of the coronavirus pandemic; hence, the early enthusiasm for MTTR stock.
Why is MTTR Stock Tanking So Badly?
On paper, the attributes supporting the underlying business of MTTR stock is compelling. Indeed, if you consider the litany of social media posts supporting Matterport, you might consider the red ink that shares printed a buying opportunity. But then, the uncomfortable question comes up.
If Matterport is such an amazing investment, why is it down 67% year-to-date?
To be fair, the session ended Feb. 18 saw MTTR stock jump over 4%. However, that came amid worsening tensions in eastern Europe, implying that largely technical factors – as opposed to fundamentally sound catalysts – contributed to the upside.
Still, the longer-term trajectory appears pessimistic for the spatial imaging specialist. Over the trailing year, MTTR stock has hemorrhaged 72% of market value. Since its public market debut – that is, when Matterport announced that it will merge with Gores Holdings VI, a special purpose acquisition company – MTTR is down more than 44%.
A few factors come into play regarding Matterport’s disappointing performance.
- SPACs have stunk up the field: According to data from Indxx.com, SPACs following their business combination have conspicuously underperformed the benchmark S&P 500. Much of this has to do with the dilutive nature of SPACs, particularly the exercising of warrants.
- Lack of due diligence: It’s an unfortunate argument but it’s unavoidable. Some private firms go the SPAC route for an initial public offering because it’s quicker and incurs a less-onerous regulatory process. But this process also enables greater due diligence, which may have prevented some of the exaggerated hype train that followed MTTR stock.
- Supply chain woes: Due to backlogs across transportation methods along with disruptions in key commodities, Matterport incurred lost sales conversion opportunities with its imaging-related products.
Though not a comprehensive list, these are some of the more significant headwinds that have clouded MTTR stock.
Can Matterport Make a Comeback?
Usually, when an asset loses more than 70% of its market value over a short period, there’s a reason for it – and not a good one. Of course, I understand the temptation to acquire MTTR stock. After all, you should buy when others are fearful and sell when others are greedy. There’s a lot of fear going on so why not, right?
Aside from the possibility of World War III, the issue with this market adage is that there’s no rule to say that certain stocks can’t go even lower following a hefty beatdown. I’m not saying that’s the case for MTTR stock. But to ignore that possibility? I think that’s completely disingenuous.
Furthermore, the reason why investors may want to wait out to digest additional news is the Federal Reserve. Back during the initial onslaught of the pandemic, both monetary (Fed) and fiscal (Washington) policies were aligned: do whatever is necessary to support the American worker, including direct cash injections.
Today, we’re facing the fallout of those actions, namely skyrocketing consumer inflation. In other words, the Fed is faced with conflicting interests: save Wall Street or save Main Street. My guess is that it has to pop the asset bubble, which wouldn’t bode well for growth-centric MTTR stock.
Look at the Bigger Picture
Even if the Fed didn’t do anything and just let the monetary situation be, I still would have issues with MTTR stock. Mainly, I’m skeptical of the idea that housing prices will continue to rise.
Back in January of last year, the Wall Street Journal reported that there were “more real estate agents than homes for sale in the U.S.,” which is more than an unusual backdrop. It’s one of the indicators that the housing market has gotten ahead of itself.
Now, that doesn’t mean home prices can’t rise for a little while longer. But I have a sinking suspicion that those dumping MTTR stock see a smaller addressable market in the years ahead. Of course, you can have a different view, but the point is this: do your own due diligence (and social media doesn’t count).
On the date of publication, Josh Enomoto 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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.