It’s Still Too Early to Buy Matterport Stock

With its rebound since late last month, it may seem as if the dust has settled on the Matterport (NASDAQ:MTTR) sell-off. After falling to as low as $5.71 per share, MTTR stock is back to around $7.75 per share.

Matterport Silicon Valley exterior sign and trademark logo.
Source: Ken Wolter /

But unlike many other stocks, which simply fell in February due to market-wide uncertainties, that wasn’t the main driver behind Matterport’s dive. Instead, it was news directly pertaining to the spatial data software provider that caused its move to new lows in February.

Namely, its guidance for Q1 and Full Year 2022. It may have beat on revenue for the December quarter. Yet as its estimates for the current quarter, and the current year, fall short of what Wall Street was expecting? It’s clear that its valuation at current prices is way too high relative to its growth potential.

Again, like I’ve discussed in prior coverage, the issue isn’t with the company itself. Instead, the issue is with valuation, and the risk that, as interest rates rise, speculative growth plays like this one will continue to experience multiple compression. In a few months, shares could fall down to a price where entering a long-term position may be worthwhile. Think low single-digits, or around 50% below where it trades today.  Until that happens, skipping out on it is still the best move.

Why MTTR Stock Dropped in February

As mentioned above, in terms of company-specific developments, Matterport’s Feb 16 earnings release and guidance update was the main bit of news. For the quarter ending Dec. 31, the company reported revenue of $27.1 million. This was slightly above analyst estimates calling for around $25.2 million in revenue.

Year-over-year (YoY) top-line growth (15%) wasn’t exactly high. Yet in defense of Matterport, this is mainly due to the company’s in-progress shift from a license-based to a subscription-based revenue model. With its guidance, though, it’s tougher to explain it away.

For the current quarter (ending Mar 31, 2022), management expects the company to generate between $25.5 million and $27.5 million in total revenue. For the full year, it’s guiding for total revenue of between $125 million and $135 million. Compare that to what it reported for Q1 2021 ($26.9 million) and full year 2021 ($111.2 million), and you can see why this update led to such a big drop for MTTR stock.

As my InvestorPlace colleague Ian Bezek pointed out on Feb 18, analysts were expecting Q1 2021 and full year 2021 guidance of $32 million and $160 million, respectively. Furthermore, its results and guidance may indicate that these underwhelming numbers are more than just a product of its pivot to a SaaS business model. It may be a sign that its long-term growth potential is far lower than previously believed.

More Derating Likely for Matterport

MTTR stock may be nearly 80% from its “meta madness” inspired all-time high of $37.60 per share. But while cheaper than once before, it’s far from being a cheap stock.

Assuming it hits the top end of guidance, Matterport currently trades at a price-to-sales (P/S) multiple of 14.5x. This may not seem too pricey, given plenty of former tech high-fliers still sport P/S multiples well above that figure. Even so, as its rate of annual growth slows down to just above 20% this year? This company could mature much sooner than expected. It may be more appropriate for the market to give it a valuation more in line with these prospects.

So, what’s an appropriate valuation? Mature software companies currently trade for mid single-digit P/S ratios. Ergo, a derating by the market, to the tune of 50% or more, would make sense. Not only that, it’s entirely possible that it falls to that level as 2022 plays out.

The Federal Reserve’s initial rate hike (set for later month) may already be priced-in. Yet the Fed plans to raise rates further before the end of the year. This could cause the rotation out of growth stocks to continue. In turn, causing Matterport to fall to a price that I believe is reasonable.

If Bullish on This 3D Mapping Play, Take Your Time

In closing, I’ll concede that there may be a risk in reading too much into Matterport’s guidance. The company’s rationale for the underwhelming growth estimates (supply chain headwinds) could be correct, and not just a convenient excuse.

Results down the road could show growth reacceleration. Something like this could enable the stock to make a partial recovery. The high potential with its product (which enables users to create 3D “twins” of real estate) could make it a takeover target, as InvestorPlace’s Tezcan Gecgil argued in a recent article.

Still, with a high chance of more disappointment, and a market environment that is more likely to send growth stocks lower rather than higher, even if you’re bullish on it, wait for MTTR stock to fall to a more reasonable valuation before buying.

On the date of publication, Thomas Niel 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 Publishing Guidelines.

Thomas Niel, contributor for, has been writing single-stock analysis for web-based publications since 2016. 

Thomas Niel, contributor for, has been writing single-stock analysis for web-based publications since 2016.

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