A “metaverse” is a virtual, interconnected, and dynamic space that allows real-world users to interact with a digital world with other users. Previously limited to the domain of science fiction, recent advances in technology have allowed companies to create their own metaverses—and earn from them. This has led to the rise of metaverse stocks to buy.
It’s not all rainbows and unicorns, though (even if some metaverses allow users to play with them.) Tech industry giant Meta recently revealed that the company had lost $46.5 billion from its Reality Labs metaverse segment since 2019, making investors cautious about buying metaverse stocks.
That fear might be unfounded, though, as some companies are doing well in the metaverse space. Some analysts view it as a potential megatrend in the future, just like how AI is dominating the market right now. So, let’s explore some buy-rated metaverse companies that have the potential for long-term growth.
Starting as Dynablox and going public in 2021, Roblox (NYSE:RBLX) operates its namesake platform, Roblox, which allows users to create and play games (called “Experiences”) programmed by other users. The free-to-play platform has user-created in-game purchases like avatars and skins, unique animation, weapons, and developer products. Additionally, RBLX offers a subscription service called Roblox Premium that rewards users with a set number of Robux, the in-game currency, and additional perks like added profit margins from all sold Roblox items. Roblox Corp is a notable player in the market, and several analysts are recommending it as a buy-rated metaverse stock.
RBLX reported a fantastic third quarter, with total revenue growing by 38% and bookings (the company’s term for Robux sales) by 20% YoY. Reported EPS exceeded estimates by 13.46%. The company is still operating at a net loss, but this is primarily due to its heavy infrastructure investments.
These investments are already reaping benefits as capital expenditures have seen a massive 60% drop from the same period last year. RBLX is also working on attracting older audiences who have more spending power. Additionally, the company is confident about its growth trajectory and plans on providing earnings guidance starting in 2024, adding another potential reason to put RBLX in your “metaverse stocks to buy” list.
Nvidia (NASDAQ:NVDA), colloquially known as “Team Green” in the PC and gaming space, is more than just a GPU manufacturer. Nvidia’s products include GPUs, semiconductors, and chip systems used in robotics, vehicles, automation equipment, and others. Furthermore, the company is one of the largest artificial intelligence hardware and software suppliers.
The recent boost in the AI sector has led to NVDA breaching the trillion-dollar market cap this year—a level that only four other companies are at right now. The company also offers the Nvidia Omniverse platform, allowing designers, developers, artists, and engineers to create physically accurate 3D scenes and applications for real-world projects and concept testing.
Investors looking for metaverse stocks to buy might think that the company has peaked, but recent financials and analyst predictions seem to say otherwise. Its last earnings report, ending July 30, 2023, indicated a 101% jump in revenue from last year. Meanwhile, EPS came in at a 38.89% surprise and ended up almost three times more than the previous reported quarter, from $0.88 to $2.50. Analysts from different firms rate the stock as a Strong Buy, confident that NVDA can sustain its growth based on insatiable AI demands and a lucrative metaverse offering.
Take-Two Interactive (TTWO)
Take-Two Interactive (NASDAQ:TTWO), a video game holdings company and home of Rockstar Games and 2K, has a potentially attractive foothold in the metaverse market.
Grand Theft Auto V, the company’s most profitable IP, has several successful (but unofficial) roleplay (RP) mod servers that allow players to live out their own stories in the game’s fictional setting. TTWO took notice and has announced plans to launch official RP servers for its upcoming game, Grand Theft Auto 6, which will pivot the game experience from a linear storyline to a metaverse setting.
GTA V and its GTA Online service reached $1 billion in sales just three days after its 2013 launch. It has since netted the company nearly $8 billion through in-game currency purchases and subscription services—all expected to appear in the future game. Aside from GTA, the company also owns lucrative IPs like Red Dead Redemption and sports games like NBA2K and WWE2K.
As of right now, the company is doing well financially, with recent quarterly EPS beating estimates by 29.03% and gross profits reaching nearly $679.2 million. TTWO is expanding its market coverage by entering the mobile gaming sector and incorporating generative AI into future releases. Experts are wholly optimistic about Take-Two Interactive’s direction with GTA 6, its RP elements, and its mobile and console game segments. It is included in various metaverse stocks to-buy lists, with firms recommending it as a Strong Buy.
On the date of publication, Rick Orford 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.