Virtual reality (VR) is one of the next frontiers in technology. In fact, Grand View Research forecasts that the worldwide virtual reality market will grow at a compound annual growth rate (CAGR) of 21.6% from now through 2027. What’s more, in 2019, the market was valued at $10.3 billion. And VR today has applications that go far beyond the video game industry.
The technology, which provides an immersive three-dimensional experience, is used in simulators to train professionals — from surgeons to airline pilots — as well as by militaries to simulate combat situations. Even fashion designers use the tech to show customers what they’ll look like in certain clothes.
So, as the adoption of this technology becomes more widespread, here are seven virtual reality stocks to buy in order to get in on the growing trend.
- Microsoft (NASDAQ:MSFT)
- Sony (NYSE:SNE)
- Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)
- Facebook (NASDAQ:FB)
- Snap (NYSE:SNAP)
- Intel (NASDAQ:INTC)
- Alibaba (NYSE:BABA)
Virtual Reality Stocks to Buy: Microsoft (MSFT)
First on my list of virtual reality stocks to buy is Microsoft. It has been involved with virtual reality for some time now, but the Seattle-based firm has chosen to focus its VR offerings on business and government clients rather than average consumers. In 2019, Microsoft released its HoloLens 2 headset, which is an upgraded version of the first HoloLens headset that was released in 2016.
Aimed squarely at businesses for training purposes, the HoloLens 2 has a price tag of $3,500 — not cheap. However, the real benefit for Microsoft has come from the U.S. Army. In 2018, the military branch granted MSFT a $488 million contract for headsets that can be used to prepare soldiers for real-world combat situations.
Aside from the HoloLens 2, Microsoft has also configured the Windows 10 operating system to allow some compatible computers to access its Windows Mixed Reality platform. Additionally, the company has helped develop a VR version of the bestselling video game Minecraft. That has generated some buzz.
So, while VR remains a small part of Microsoft’s overall business, the company is clearly pushing in that direction. MSFT stock continues to perform well and is up 67% from its March low to around $222 a share.
Sony (SNE)
Sony is taking a contrary position to Microsoft when it comes to virtual reality — unlike MSFT, the Japanese company is aiming its VR offering squarely at consumers. And by consumers, I mean gamers.
Mainly, Sony has been trying to sell video game enthusiasts on a VR headset that can be used with its popular PlayStation console. As a result, uptake of its PSVR has been strong. SNE reports that it has sold more than five million units. The company has also hinted that an updated version could accompany the new PS5 console that came out this past November.
So, while Sony is not focusing on virtual reality beyond video games, it has enjoyed tremendous success with its PlayStation-based headset. And gaming remains an important segment of the company’s business, helping lift SNE stock nearly 98% from its March doldrums this year. With strong sales expected for the company’s PlayStation 5 console, the stock should continue performing well in 2021. That makes it one of the better virtual reality stocks to buy.
Alphabet (GOOGL)
This parent company of Google is a growing player in virtual reality — in fact, the search engine giant has taken a somewhat experimental approach to VR. While companies like Microsoft have created high-tech virtual reality headsets, Alphabet has released what it calls Google Cardboard. It’s a headset that is literally made of cardboard, with which users can insert a smartphone to create an instant virtual setting.
The project was popular enough that Alphabet followed it up with Google Daydream, a more standard-looking virtual headset that costs under $100 to purchase. This low-cost approach to VR seems to appeal to price-conscious consumers.
So, aside from its failed Google Glass project, the company has had considerable success with virtual reality. Now, Alphabet is integrating aspects of VR into some of its more popular Android operating features like Google Maps and its Pixel smartphones. It is also experimenting with integrating VR into YouTube, its video content sharing website.
Where the company will ultimately go with this technology remains to be seen, but it is a growing part of its business. Simply put, Alphabet is a powerhouse and, as such, a solid bet when it comes virtual reality stocks to buy. GOOGL stock has risen roughly 71% since March. It’s now at over $1,700 per share.
Facebook (FB)
Facebook has been a leader in virtual reality for several years now. In 2014, the company purchased Oculus, one of the foremost virtual reality creators. Since then, FB has worked at perfecting several different Oculus VR headsets. Today, Oculus is viewed by many people to be the gold standard when it comes to virtual reality — and while the headsets remain a small part of Facebook’s overall business, their success has enabled it to push further into the nascent VR industry.
Beyond the Oculus, Facebook has also added virtual reality filters to the photos and videos captured on its Instagram and Facebook Messenger platforms. These filters have proven popular with young, tech-savvy customers. So, as the company looks to diversify its business beyond ads, Vr is sure to continue playing an important role.
For this past year, FB stock has remained resilient during the pandemic, with its share price rising 99% from the March low to about $274. With a strong foothold in the growing industry, Facebook is one of the better virtual reality stocks to buy.
Snap (SNAP)
Next on my list of virtual reality stocks to buy is Snap, the parent company of social media app Snapchat and a leader in both virtual and augmented reality. The company is probably most notable for its filters that allow users to add puppy dog ears to their selfies. In fact, consumers love enhancing the photos they post on Snapchat with its augmented reality features. According to the company, many users engage with the technology daily. That makes it one of the most widely used VR platforms in the world.
Now, Snap is pushing to monetize virtual and augmented reality. For one, the company is experimenting with adding VR to advertisements and creating its own headset. Clearly, it wants to take the popularity of its augmented reality tech beyond the social media app.
SNAP stock has been on a steady upward trajectory in 2020. The company’s share price has increased 534% since March, rising from a low of $7.89 to over $50 today. After a brief downturn in November, the name has continued its upward march. That makes it another strong entry on this list of virtual reality stocks to buy.
Intel (INTC)
Unlike most of the other companies on this list, Intel does not manufacture and sell virtual reality headsets or other devices. However, the company’s technology helps make those virtual reality headsets possible.
What do I mean? Well, Intel semiconductors power many of the VR headsets mentioned in this article, most notably the Oculus. Plus, Intel continues to tinker and refine its processors so that they can better support VR capabilities. While the company has flirted with creating its own headset, it has ultimately decided to focus on making powerful semiconductors that enable other VR devices.
Beyond its processors, Intel has also been involved with the VR Challenger League, the first virtual reality e-sports league. The company has also created 360 degree cameras that can be used to broadcast professional sporting events in VR. Leagues like the NBA and NFL have already used this True View technology to provide better angles on the fields and court.
Right now, INTC stock remains well off its 52-week high, currently trading at $48.63. That makes this case one of the best entry points on this list of virtual reality stocks to buy.
Alibaba (BABA)
Last on my list of virtual reality stocks to buy is Alibaba, one of China’s premier tech companies. With BABA’s impressive record, it should come as no surprise that the firm is heavily invested in virtual reality.
Why is it, though? For one, Chinese consumers are embracing VR well, with headsets cheaper there than elsewhere in the world. But Alibaba is moving beyond just video games. The company is also using VR to enhance the online shopping experience through its Buy+ platform, which enables consumers to shop in a virtual mall. Buy+ is one way in which Alibaba is becoming a leader in monetizing this technology
As one of the world’s biggest cloud service providers, Alibaba will also likely benefit from growing demand for cloud-based VR data processing. Plus, BABA has partnered with Intel to create advanced VR broadcasting technologies that can help televise live events. That puts the company at the forefront of practical applications in the field.
Right now, BABA stock is up over 40% from its March lows despite a decline since October. It now trades at over $238 a share.
On the date of publication, Joel Baglole held long positions in FB, MSFT and BABA.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.
