The once-buoyant realm of augmented and virtual reality (AR/VR) is up against serious challenges as it aims to secure a foothold in the mainstream market. The lack of content and steep prices continue to impact broader adoption, prompting savvy investors to consider offloading virtual reality stocks to sell.
According to a report from research firm Omdia, VR headset sales dropped by 24% last year, plummeting to 7.7 million units from 10.1 million the previous year. Moreover, a forecasted 13% decline is expected for both 2024 and 2025. These figures point to a recalibration period for the VR industry, which should have investors exercise caution.
Moreover, with the focus on AI stocks lately, stocks in the VR realm are unlikely to attract investor attention, at least in the near term. Having said that, it’s imperative to exercise caution and avoid these three virtual reality stocks to sell, offering little to no upside potential ahead.
Matterport (MTTR)
Matterport (NASDAQ:MTTR) excels in the production of digital twins for physical environments, proving pivotal for VR. Through its powerful 3D scanning technology, it captures the size and aesthetics of real-world locations for virtual experiences. Primarily targeting the real estate industry, it offers immersive 3D tours, enabling property exploration remotely.
Over the years, it has been an excellent growth stock, having grown its revenues at a rapid rate. The growth of its subscriber base has been particularly remarkable, expanding to one million subscribers, a seven-fold increase since 2018.
However, the weakness in the housing market given the heightened interest rates casts shadows over its near-term prospects. Despite those concerns, its stock is up over 60% year-to-date (YTD), outpacing the S&P 500’s gains by a massive margin. MTTR stock has pulled back of late though, a trend that may persist given the prevailing uncertainty about potential interest rate cuts. On top of that, its profitability position is worrying, with it burning through millions each quarter.
Unity Software (U)
Unity Software’s (NYSE:U) powerful game engine facilitates the creation and management of 3D environments. The robust platform effectively enhances interactive experiences across gaming, training, and simulations on various VR devices.
It’s been one of the most consistent businesses in its niche, but the slowdown in the video gaming industry has weighed down its recent results. Its first-quarter (Q1) results showed a negative 8% growth from the prior-year period to $460 million. Though its revenues beat analyst forecasts due to low expectations, the focus was on the wider-than-anticipated losses.
GAAP loss per share was 75 cents per share against an anticipated 67 cents per share loss, taking its net losses to $291 million. The company forecasts a sizeable revenue drop of 6% to 7% for the upcoming quarter, pointing to a challenging financial trajectory. Additionally, it has a stretched balance sheet with $2.2 billion in convertible notes against only $1.2 billion in cash.
Match Group (MTCH)
Match Group (NASDAQ:MTCH) is one of the most established names in online dating, housing popular brands such as Tinder and Hinge. Over the years, we’ve seen it harness its tech prowess, including cutting-edge VR, to effectively boost its top-line growth and redefine the online dating experience.
The company introduced a VR dating environment where users can effectively interact through their avatars in a virtual venue. It involved creating a more immersive dating experience by allowing users to communicate more interactively.
However, despite these novel initiatives, the rise of free competitors and shifting user preferences have flipped the script on the company. Moreover, we’ve seen its most popular app, Tinder, lose a market share to competitors like Bumble (NASDAQ:BMBL), rapidly gaining traction. Moreover, this decline has become even more evident in Match Group’s Q1 results, which show a 6% drop in its paying user base across its portfolio.
On the date of publication, Muslim Farooque 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
