The tech giant made headlines in late October, announcing that it’s changing its corporate name to Meta as part of a new focus on building a metaverse. The concept involves constructing integrated virtual online environments in which people live, work and play. Make no mistake though, the metaverse isn’t something that Facebook created. This is something that has been around for years. So, what exactly is the metaverse?
At its core, it’s a realm that would function like the internet we’re used to, but one in which our avatars could move through and participate in. Perhaps you’ve seen the movie “Ready Player 1”. That is probably one of the best examples to imagine how the metaverse blends into the real world. The metaverse has plenty of potential to be as big as the internet. In fact, Bloomberg Intelligence estimated that the global metaverse market could reach $800 billion by 2024. This is why many metaverse stocks have become a focus in the stock market today after Facebook’s latest news.
Key Points
- Nvidia could see its profit margin soar with its Omniverse software platform.
- Unity Software’s acquisition of Weta Digital enhances its ability to serve metaverse content creators.
- Roblox is a pure-play metaverse stock, with nearly 50 million daily users active on the platform.
Revenue from the metaverse, or virtual interactive worlds, is estimated to more than double to $400 billion by 2025, according to Grayscale Research. Experts believe these 3D environments represent the next step in social media’s development and could fundamentally shape how people shop and play games in the future, among other things.
Top 10 Metaverse Stocks you can Invest in :
- Metaverse sector: Infrastructure
- Market value: $745.0 billion
Nvidia (NVDA, $297.52) has frequently been touted as one of the best semiconductor stocks to buy for the long haul. Not shockingly, its foray into the worlds of artificial intelligence (AI) and other fast-processing chips make it a powerful player in the world of the metaverse stocks.
NVDA’s chipsets are already finding their way into a variety of servers and other centralized computers needed to run complex calculations. That includes edge computing platforms run by firms like Fastly. With this leadership position and the need to move with speed, Nvidia is almost guaranteed to be a top winner from the metaverse revolution.
And another reason its future looks even better: its pending buyout of ARM Holdings from SoftBank Group. ARM is a major player in patents and software that allow chips to be implemented into computer systems. With the buyout, NVDA will be able to build out its end-to-end ecosystem. In other words, it can place its graphics processing unit (GPU) and advanced chips into more systems directly and boost computing power. And the metaverse will need this kind of computing power to work.
02. Roblox
Roblox is an online entertainment platform that may be the closest thing to an existing social metaverse today. In essence, the company is powered by a global community of millions of developers who produce their own immersive multiplayer experiences using Roblox Studio, its intuitive desktop design tool. It also continues to rank as one of the top online entertainment platforms for audiences under the age of 18 and is purely driven by its community of users and developers.
The company recently announced that it will have its Investor Day 2021 on November 16, so there is certainly much to look forward to. Sure, Roblox stocks fell on Monday after the weekend outage that kept its popular games offline for three straight days. That could be a cause for concern, but that might just be a blip. Seeing how the company continues to innovate on pioneering its metaverse, should investors consider investing in RBLX stock after the recent dip?
03. Unity
Unity gives users the ability to create games and experiences in both 2D and 3D, and the engine offers a primary scripting API in C#, for both the Unity editor in the form of plugins, and games themselves, as well as drag and drop functionality. Prior to C# being the primary programming language used for the engine, it previously supported Boo, which was removed with the release of Unity 5, and a Boo-based implementation of JavaScript called UnityScript, which was deprecated in August 2017, after the release of Unity 2017.1, in favor of C#.
Within 2D games, Unity allows importation of sprites and an advanced 2D world renderer. For 3D games, Unity allows specification of texture compression, mipmaps, and resolution settings for each platform that the game engine supports, and provides support for bump mapping, reflection mapping, parallax mapping, screen space ambient occlusion (SSAO), dynamic shadows using shadow maps, render-to-texture and full-screen post-processing effects.
04. fastly
Over the next five years, e-commerce, streaming media, social media, and digital payments are likely to be defining trends, and Fastly’s platform helps customers in each industry. For example, e-commerce enablers like Shopify and Etsy use Fastly to help personalize the shopping experience for customers, which improves conversion rates. Fastly also helps digital payments providers like Stripe by reducing checkout times and enhancing security. Similarly, social media platforms like Pinterest and streaming content providers like Spotify use Fastly to reduce lag time and provide a reliable digital experience for consumers. And Fastly’s role in enabling these trends should continue to drive customer and revenue growth in the coming years.
Likewise, artificial intelligence will become increasingly important over the next five years. In fact, CEO Joshua Bixby recently indicated that more customers are using Fastly’s platform to help artificial intelligences learn from and interpret large amounts of data. Fastly’s role in enabling AI and data processing at the edge should help support the growing internet of things, or the IoT for short, and the expanding number of connected devices.
By 2025, IBM estimates that the number of IoT devices will reach 75 billion, up from 31 billion in 2020, bringing the total number of connected devices worldwide to 150 billion. IoT sensors will monitor connected vehicles, industrial machines, smart cities, and smart factories; autonomous robots will work in agriculture, logistics, and medicine; technologies like augmented reality and virtual reality will become more prevalent.
5. Meta
No other company is investing as heavily in building the metaverse as Meta Platforms . The company even recently changed its name from Facebook to better reflect its focus on the metaverse.
Meta is already a leader in virtual reality (VR) with its Oculus devices. It also recently took an initial step into augmented reality (AR) with the launch of smart glasses. That’s only the tip of the iceberg.
CEO Mark Zuckerberg said in the company’s third-quarter conference call that Meta’s investments in AR and VR to build the metaverse will reduce its operating profit by around $10 billion this year. He added, “I expect this investment to grow even further for each of the next several years.”
Will Meta’s big bet on the metaverse pay off? Perhaps not. But the company has a clear vision of what it plans to create and is putting the resources into play to make it happen. My prediction is that Meta will be successful in pioneering the metaverse and will make investors a lot of money over the next decade and beyond.
06. Unity Software
Unity Software owns one of the two main 3D video game engines, which allows designers to customize how video game players move and interact within their games. Overall, virtually all the best games in the global video game market rely heavily on Unity’s tech. In turn, this could make U stock a go-to for investors looking to bet on the gamification of the metaverse. As of last week, Unity signed a partnership with Tripolygon, a 3D modeling service focusing on metaverse applications.
Moreover, this news comes less than a week after the launch of the Unity Gaming Services (UGS) platform. With UGS, Unity enables creators to develop 2D and 3D content for AR and VR devices alongside other consumer smart devices. On top of that, UGS also facilitates cross-platform launches. This would allow video game developers to access broader gaming markets, further incentivizing the use of Unity’s offerings. As such, could U stock be a top pick for you now?
07. Autodesk
Software may be eating the world, but it’s also responsible for building it.
The leading firm in that space is Autodesk, which has seen its market cap jump from ~$14B to $65B over the past 5 years.
Engineers use Autodesk’s software to build slightly important infrastructure such as water treatment facilities, railways, airports, commercial buildings, and highways.
Autodesk has become a market leader thanks to 2 big bets
- A focus on higher education: Getting leading universities hooked on their certification program has ensured that up-and-coming engineers use their products as early in their career as possible (also, it’s become a ubiquitous CV booster).
- A pivot to subscriptions: Making the transition from perpetual licenses to SaaS was a risky move that paid off — offering customers more flexibility and boosting cash flows.
The benefits of these moves have compounded, thanks to natural virality
Most construction projects require multiple partners that benefit from having a unified solution across all parties. That means if one contractor is using Autodesk, all of the partners follow suit.
This dynamic has helped Autodesk grow organically and increase lock-in across their customer base.
08. Microsoft
In Microsoft’s most recent Ignite conference, the company’s annual event for highlighting key digital trends and new innovations, the spotlight was put on the announcement of its version of the Metaverse which will be made available in the first half of 2022. Initial offerings will be built on Microsoft’s existing platforms:
- Mesh on Microsoft Teams: Microsoft Mesh will be integrated into Microsoft Teams, the collaborative platform now used by more than 250 million users worldwide, to create a virtual world for collaboration. Mesh will feature digital avatars for users to engage in dialogue, file sharing, and even PowerPoint presentations face-to-face virtually. Mesh can also be accessed from any device ranging from VR headsets like the HoloLens 2 or Facebook’s Oculus for a 3-D experience, to mobile phones and computers for a 2-D view.
- Azure Digital Twins: Built on Microsoft’s suite of Azure cloud services, Digital Twins can recreate virtual models of real environments, ranging from retail spaces to manufacturing plants. The newest virtual tool built on Azure facilitates simulations in real-time and help businesses “drive better products, optimize operations and costs, and create breakthrough customer experiences”.
- Dynamics 365 Connected Spaces: Linking to in-store video cameras and IoT sensors, Connected Spaces helps retail stores collect real-time data and generate insights for enabling greater operational efficiency. The virtual tool’s capacity ranges from notifying an employee of an opened refrigerator door on aisle five, to generating insight on consumer preferences. Connected Spaces also enables retailers to bring their storefronts to the metaverse, a feature that comes at an opportune time as e-commerce adoption continues to accelerate in the post-pandemic era.
09. Shopify
Shopify stock recently hit a new all-time high (although it has pulled back) despite posting a rare quarterly earnings miss just a few weeks ago. The quarter (Q3 2021), which was dragged down by the ongoing economic reopening and pandemic wind-down, was nothing to write home about. Still, it was not nearly as bad as what many investors seemed to be bracing themselves for.
Despite the hefty premium multiple on the stock, which left little in the way of error, the company has continued to demonstrate that its epic rise is more than sustainable. In fact, continued momentum suggests that investors weren’t bullish enough when the stock was trading at nosebleed-level valuations that would have frightened all but the most growth-savvy of investors.
Indeed, high-growth investing is a complicated game, and sometimes, it can pay to buy and hold, even in the face of intense volatility.
Shopify’s valuation is undeniably steep by almost every valuation metric (like price to sales). Still, it’s hard to be anything but bullish on the stock if you’ve got a long-term horizon.
Although analysts are pretty split on their views on Shopify, I remain bullish, as many growth prospects may still yet be on investors’ radars. Further, the sustainability of Shopify’s growth in more challenging environments may still be underestimated. (See Analysts’ Top Stocks on TipRanks)
10. Matterport
Matterport (NASDAQ:MTTR) stock stems not from its current line of business, which is focused around capturing real estate with large proprietary cameras, digitizing the output, and turning that data into 3D models used by, amongst others, realtors to sell fancy homes. That is not an exciting business. It’s labor intensive for the user, serves a fairly limited addressable market, and doesn’t appear to lend itself to an expanded product set. Such a company, you might conclude, is likely to end up as acquisition fodder for an Autodesk (ADSK), a Nemetscheck (NEMTF, NEMKY) or some other CAD software vendor searching for an edge. So if you take a look at MTTR in this light and you say, well, this thing is tiny at just $56m of revenue for the first half of 2021, it’s neither accounting profitable nor cash generative, it appears to already be going through the late-in-life transformation from perpetual to subscription licensing that is so painful for even big vendors like Splunk (NASDAQ:SPLK), and, what’s this? It’s valued at an enterprise value of $3.5bn representing something like 25-30x a bullish estimate for FY12/21 revenues? Thanks, I’ll pass – is what you can most justifiably say. And nobody could say you were wrong, on the facts in front of you.
