- Matterport (MTTR) stock has fallen 77% from its 52-week high
- Short-term concerns may outweigh the undeniable growth of the metaverse
- Opportunistic investors may find that MTTR stock is a cautious buy
The first time I wrote about Matterport (NASDAQ:MTTR) stock, I remarked that the company had a good elevator pitch. That simply means that, unlike some growth stocks, retail investors can digest what the company does in less than a couple of minutes.
However, in the last four months, the elevator has been only traveling in one direction for MTTR stock. That means if you were buying the stock on the way up, you may be holding a heavy bag. At the same time, with Matterport stock trading below $10 a share, this may be the right time for opportunistic investors to begin to nibble at the stock. However, in this risk-off environment, you should be careful to not get ahead of the stock.
Growth is Hiding in Plain Sight
A famous quote attributed to writer and cartoonist Allen Saunders states, “Life is what happens to us while we are making other plans.” For early adopters of metaverse stocks that sums up the bullish narrative for Matterport. The metaverse is being built in plain sight, but many investors will be caught off guard when Web 3.0 becomes part of our daily reality.
This isn’t without precedent. Think of the growth of the internet. Look at what’s currently happening with cryptocurrency. Matterport has defined the category of digital twin technology. And the company is by far the industry leader.
The Real World Is Creating Headwinds for MTTR Stock
But an element of caution is still warranted. Many investors are being affected by real-world concerns. A study conducted by LendingClub Corporation in partnership with PYMNTS.com reported that even Americans with six-figure incomes are “increasingly living paycheck to paycheck.”
That means that more disposable income is being used to pay for necessities. Do I believe that means retail investors are going to stay on the sidelines? Not at all. But I do believe they will become increasingly more selective. And speculating in MTTR stock is certainly not a necessity.
Another potential headwind comes from the real estate sector. This is where the company makes a substantial degree of its revenue. If that market slows down, so will Matterport’s revenue. With mortgage rates on the rise (although still low by historical standards), MTTR stock may continue to be under pressure.
A Solid, but Not Spectacular Balance Sheet
Matterport has been generating significant growth from its subscriber base. Subscription revenue has grown sequentially every quarter. In fact, subscription revenue represented 61% of total revenue in the fourth quarter. This means that the company should continue to chip away at its current negative cash flow situation. However, as Mark Hake recently wrote, the company “can afford to burn cash for another 2 years or so before needing to raise more.”
Chartmill cites a total of 12 analysts with a consensus price target of $15.64. That would be a gain of close to 100% from the current MTTR stock price.
MTTR Stock Is a Cautious Buy
Matterport stock may no longer be a falling knife, but that doesn’t mean it’s time for investors to go “all in” on MTTR stock. The company needs to prove to investors that it can reverse the bearish revenue trend. Particularly since Matterport is not expected to be profitable for quite some time. And at this point, investors have been staying away from unprofitable growth stocks.
There’s no question that Matterport is a growth stock. However, many investors are rebalancing their portfolios for the current risk-off environment. This means that MTTR stock may have a tough time making the cut.
Still, with the stock trading below $10, a small position with the same pool of money you might use for cryptocurrency investing is warranted. This isn’t a stock for money you can’t afford to lose because the long-term trend still appears to be bearish.
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.