Matterport (NASDAQ:MTTR) continues to draw the interest of retail investors. Unfortunately, that’s not being reflected in the stock price, which continues to fall. Today, MTTR stock trades hands for around $7 a share. That puts the stock down over 60% from its 52-week high of $37.60.
But if investors need any good news, the 10% drop in the stock over the last 30 days may indicate that the rate of decline is slowing. MTTR stock is also showing some evidence of being oversold. And with the stock price consolidating, there may be a setup for traders.
However, that doesn’t mean the sell-off is over. As long as the market remains under pressure, it may be difficult for a speculative stock like Matterport to move higher.
What can Matterport do? A good first step may be to focus less on the metaverse and more on the real world. That will create its own set of problems, but they may be more navigable.
The Metaverse is Still Being Defined
Allow me to explain. In a recent interview, Matterport CEO RJ Pittman commented about how the metaverse is what Matterport has been about since its inception. Later in the interview, Pittman defines the company’s mission as being to help companies, “embrace the digital realm as a way to run their organizations and certainly run their facilities more efficiently.”
However, that may not be what comes to mind when many investors think about the metaverse. In fact, when a group of tech executives were asked to define the metaverse there was no standard definition.
For example, it seems clear that Meta Platforms (NASDAQ:FB) has a more expansive view of the metaverse than a company like Redfin (NASDAQ:RDFN) which currently provides about two-thirds of Matterport’s revenue.
A Strategy That is Not Without Risks
The real estate market is notoriously cyclical. And with many signals flashing to indicate the U.S. economy is heading for a recession, this sector may be getting ready to cool off. And as Josh Enomoto pointed out, the real estate market may be getting ready to cool off regardless of what happens in the broader economy.
That wouldn’t bode well for Matterport. Investors are already concerned about the company’s slowing rate of growth. A significant loss of revenue from its largest sector will be bearish for the stock. As Mark Hake noted, the company’s growth projections leave no room for missteps.
The Bottom Line
If the C-suite is having difficulty defining the metaverse, it’s likely that retail investors are experiencing the same difficulty. I understand that, in the last two years, many investors have thrown money at companies that were years away from revenue, let alone profit. But a sharp correction has a way of changing behavior. This flight to value is well under way, and MTTR stock is unlikely to make that cut.
In this risk-off environment, fundamentals are back in fashion. Investors are looking to buy companies that are growing earnings, or at least have free cash flow (FCF). That’s another factor working against MTTR stock. The company is not yet profitable and is showing negative FCF. That isn’t expected to change anytime soon. Fortunately, as Mark Hake recently wrote, the company appears to have enough cash on hand for a couple of years.
Analysts give MTTR stock a consensus price target of $16.17 which marks a 130% upside. And institutional ownership of Matterport stock continues to grow. At about 33%, there’s still work to be done. However, buyers far outnumber sellers and it seems that, for now, they are holding on to their positions. That will be something to watch in coming months.
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.
