After the downfall of the NFT market post-FTX collapse, the assumption was that favorite metaverse stocks would follow suit. However, metaverse is a much larger market. It encompasses software platforms, hardware devices for virtual reality (VR) and augmented reality (AR) , GPU chips, artificial intelligence (AI), blockchain, and the Internet of Things (IoT).
Following the popularization of VR and AR by Apple’s Vision Pro and Meta’s Quest, they encompass a high growth market. Next MSC positions metaverse growth at a compound annual growth rate (CAGR) of 44.1% from $55.4 billion in 2022 to $988.54 billion by 2030. Likewise, the International Data Corporation (IDC) projects CAGR at 37.2% for worldwide AR/VR shipments between 2023 – 2027.
Certain metaverse stocks are critical in creating the infrastructure for the novel experience of inter-linked content. Let’s take a look at three of Wall Street’s favorite metaverse stocks.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is the blue-chip stock representing exposure in all major tech winds. This includes AI Copilot to image generation, productivity suits, games and metaverse. As small to medium-sized enterprises (SMEs) onboard the metaverse train, they will likely offsource their computing needs to Microsoft’s Azure Cloud.
Per Statista, the number of Cloud Gaming market users is projected to reach 493 million by 2027. Steadily closing the gap with Amazon Web Services (AWS), Azure’s market share increased by 2% in Q4 2023. While AWS dropped by two points, Azure grabbed second place around 22% market share.
For comparison, Google Cloud is far behind at 11% market share. In Q2 FY24, Microsoft saw a 30% year-over-year (YOY) revenue increase in Azure and other cloud services. It outpaces Windows’ modest revenue increase of 9%. Presently, Microsoft’s mixed reality headset HoloLens 2 is premium-priced at $3,500, similar to Apple’s Vision Pro.
With no announced plans for cheaper versions, Microsoft’s Windows Holographic platform shows the company remains building and updating metaverse tools. MSFT continues in heavy investor spotlight. Thirty-nine analysts pulled by Nasdaq view MSFT average price target at $470.3 versus current $416 per share, twelve months ahead.
Meta Platforms (META)
Changing from Facebook to Meta Platforms (NASDAQ:META), the company announced to the world its next big venture. It became a metaverse stock. Mark Zuckerberg started this bet when he bought Oculus from Palmer Lucky in 2014 for $2 billion.
Since then, the company offers the most cost-effective VR solution on the market. According to Counterpoint Research, Meta holds global AR/VR dominance at 72% market share, as of Q4 2023. In second place is Sony with only 15% market share. In addition to flagship Quest 3 headsets priced at $500, Meta plans to release AR glasses. Then a smartwatch will follow by 2027.
Although Meta’s Reality Labs still bleeds operating losses of $4.6 billion in Q4 2023, the company has deep pockets. It can support metaverse adoption moving forward, having reported $43 billion in free cash flow for full-year 2023.
Of the Magnificent Seven stocks, META remains a winner with 40% year-to-date (YTD) returns. And 47 analysts pulled by Nasdaq position META for an average price target of $528.8 versus current $484 per share.
Roblox Corp. (RBLX)
When it comes to content platforms, it is often difficult to gauge viability. Roblox Corp. (NYSE:RBLX), one of the three Wall Street’s favorite metaverse stocks, seems to have cracked the formula by offering a wide range of game modes, combining it with social connectivity. Moreover, RBLX developed streamlined tools for players themselves to create content, as they receive $0.0035 for every in-game Robux spent.
Roblox’s stock surged more than 12% following the gaming firm’s announcement of Q4 2023 earnings that exceeded expectations and strong guidance for the full year. The company paid ATH of $740.8 million to game developers, a YTD uptick of 19%. Still focused on growth and development, the company yielded a net loss of $1.1 billion. However, it increased revenue by 26% YOY to $2.8 billion.
Preparing for the future as a metaverse stock, Roblox announced Meta’s Quest VR support last July. Presently, Roblox is one of the most popular apps in Meta Quest Store with over 5,000 ratings, with 59% of them giving a five-star rating. Twelve months ahead, 23 analyst inputs pulled by Nasdaq give RBLX an average price target of $49.79 versus current $39 per share.
On the date of publication, Shane Neagle did not hold (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.
