Matterport (NASDAQ:MTTR) is a company focused on applying 3D graphics technology to markets such as real estate. Its combination of cameras and software allow users to create visual representations of physical locations and use these digital projections for things such as presenting real estate to potential clients. MTTR stock skyrocketed following its special purpose acquisition deal as it seemed like the right company at the right time.
You see, Matterport was just starting to get its name out there as the metaverse excitement took off. Mark Zuckerberg announced his huge metaverse plans and any company in the space blasted off in anticipation. Matterport, with its ability to create digital representations of the physical built world, seemed like a potential metaverse winner.
Since then, however, the metaverse hype has died down virtually overnight. Meanwhile, Matterport’s actual business failed to take off. The company has come up short versus its initial projections laid out at the time of its SPAC deal.
In this market, traders aren’t giving any companies that miss expectations a pass. MTTR stock has collapsed from a high of $37 to just $8 now.
Matterport Is Struggling
When Matterport went public, it appeared to have a promising future as a standalone company. However, the company’s ability to deliver on the business plan simply hasn’t been there. As such, MTTR stock has been on a rapid trajectory toward penny stock territory in recent weeks and months.
Admittedly, there were short-term issues around repositioning the business toward a subscription model. Even granting that, however, revenues have come up far short of expectations. There’s no quick fix on the horizon, either. Analysts project the company to run sizable operating losses through at least the end of 2024.
And as things stand today, the company is still only doing around $130 million per year in annual revenues. This is not a large business yet, nor one that is anywhere near reaching self-sustaining profitability or cash flow generation. Meanwhile, its costs for items such as marketing are absolutely soaring in recent quarters, even as revenue growth has largely dissipated.
Yes, bulls can point to the company having more than $400 million of cash and short-term investments on hand as of last quarter. That gives the company a fair bit of runway to try to get the business going in a better direction. Still, given the company’s sizable and expanding operating losses, it’s worth asking if Matterport will want to stick to the current trajectory.
Would Matterport Be Open to a Merger?
The lower Matterport’s stock price drops, the more interesting it becomes as a potential acquisition target for a larger rival. I see a firm like Adobe (NASDAQ:ADBE) or AutoDesk (NASDAQ:ADSK) being natural bidders for Matterport if the price were right.
Those large software firms already offer extensive software platforms for their clients. Adobe is a favorite among creative workers. Its software is widely used in animation, marketing, newspapers and magazines, and other such fields that rely on graphic design. It’s not hard to see how Matterport’s 3D graphics applications could fit into the broader picture.
AutoDesk tends to be stronger in industrial and manufacturing uses. A lot of AutoDesk software usages revolve around designing prototypes of things to be manufactured or assembled. AutoDesk is also at the leading edge of providing software for new technologies such as 3D-printers. It would make sense to have AutoDesk own Matterport’s technology and help integrate it into their broader portfolio of solutions for mixing software and graphics with real world applications.
MTTR Stock Verdict
Matterport is stuck between a rock and a hard place right now. It’s running large losses at the moment. However, investors are dumping shares due to its slowing revenue growth rate. To boost revenue growth, it would likely need to expand its marketing budget even more, which would cause those operating losses to accelerate.
This was all fine when MTTR stock was at $25 and it could easily fund its expansion plans with new equity offerings. With the stock below the initial $10 SPAC deal, however, equity funding is getting more expensive.
Meanwhile, one of the company’s largest costs is marketing simply to get its name out there and help customers discover the product. An acquisition by a larger graphics-oriented software company could be just the answer to help stop the bleeding for MTTR stock.
On the date of publication, Ian Bezek 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.