Metaverse is a new concept that is yet to pick hype. Facebook’s recent decision of changing its company name to metaverse has made headlines. There are quite a few companies that are working on virtual and augmented reality – the metaverse stocks. Some stocks are already established players in the market and some are emerging as new entrants.
The concept involves constructing integrated virtual online environments in which people live, work, and play. It’s basically a new way of living that we see in fiction movies such as in avatars.
Metaverse stocks are unexplored at the moment because the industry is just kicking off. Once investors start to realize the significance and prospects of the metaverse, meta stocks will go bananas.
We bring you the five most promising metaverse stocks to buy beforehand, that will give you huge returns going forward.
Roblox Corporation (RBLX)
Roblox Corp. (RBLX) develops and operates an online entertainment platform. The company offers an application, Roblox Client, that allows users to explore 3D digital worlds. The metaverse, defined as interconnected virtual realities, doesn’t exist yet. But gaming seems to be a logical first step for the concept. Roblox has already made progress in the video gaming sector. The company mainly relies on computer graphics and programmed virtual experiences.
Roblox stock has soared over 70% since its listing in March 2021. The stock is up materially from its listing price of $70 but it has plenty of price appreciation still to come. In the long-term, RBLX has much to cover considering the market to grow.
Roblox has established itself as an infinite game of sorts – an environment where creators can create new worlds for players to join, participate in and become creators themselves. RBLX has already started to capture a good market portion and that too at such an early stage.
In the third quarter of 2021, Roblox recorded over 47.3 million new daily active users, jumping 31% from the same period in 2020 and almost 2.6 times larger than in the third quarter of 2019. The company has strong financials that will help in expansion and future roadmaps.
Roblox’s strategic roadmap for growth includes expanding international reach, broadening age demographics, expanding platform experiences, and improving monetization.
The valuation is high with the RBLX stock selling at 40 times sales, aggressive investors can buy right now, while more cautious investors might want to wait for a pullback. Morgan Stanley has upgraded the stock to overweight with a price target of $150.
Snap Inc. (SNAP)
Snap Inc. (SNAP), the parent company of popular social media app, Snapchat has already made its way into the metaverse world. Compared to Facebook, Snapchat is way ahead. That’s what Jefferies Analyst Brent Thill believes.
Snap has recently launched its 3D features. It allows users to enable and create their own, personal virtual human. While the launch may be a game-changer for everyday users, the long-term effects on the virtual industry will be seismic. The after-effects will make a major difference for the company. As we have already mentioned, the metaverse concept is yet to explode among the masses.
Considering the financials of the SNAP stock, it looks decent enough to invest. The stock has performed phenomenally during the pandemic period with increasing daily users. The sales in the past five years have increased by almost 110%. While the quarterly sales are up by 57%.
Like Roblox, Snap benefits from its youthful community. The company boasts a 90% penetration rate among 13- to 24-year-olds in established markets like the U.S., U.K., and Australia.
Snap is still in the early phases of augmented reality. With the expansion of the AR market, Snap will penetrate deeper and take a large market share. Analysts at Research and Markets expect the AR opportunity to expand at a compound annual growth rate of 32% to $88 billion by 2026.
SNAP stock has an average rating of buy, with the sentiment to out-perform the market. The target price for the stock is around $75. That marks an upside of 50% for SNAP.
Autodesk Inc. (ADSK)
Autodesk Inc. (ADSK) provides 3D design, engineering, and entertainment software and services worldwide. About 70% of Autodesk’s business comes from design software for architecture, engineering, and construction. Engineers and architects use Autodesk’s application to virtually design 3D buildings and infrastructure projects.
The company has a wide range of products designed specifically for building virtual reality and augmented reality 3D animations and buildings. That makes ADSK a perfect metaverse stock. Recently, ADSK stock has taken a dip following the investor’s reaction to the company’s outlook. Despite surpassing the quarterly estimates for earnings and revenues, the stock has moved towards the trench. Well, that’s a great sign for new investors to jump in as the stock is near its current support zone.
Autodesk reported quarterly earnings of $1.33 per share during the third quarter of 2021. That surpassed the Zacks Consensus Estimate of $1.25 per share. While the revenues came around $1.13 billion during the third quarter compared to $952.4 million a year ago.
As it stands, ADSK is highly overvalued, to be honest. However, the metaverse projected hype period would take the stock even higher. That’s why analysts are bullish on the stock. Analyst firm Credit Suisse has rated the stock to outperform with a price target of $450. While the average target for ADSK is around $358.
Tencent Holdings (TCEHY)
Tencent Holdings (TCEHY), the world’s biggest gaming company and operator of Chinese super app WeChat, is all set to be a mega metaverse company. The company recently hinted towards investing in metaverse through a range of businesses. That includes video game development and social networking as main targets in the metaverse.
Chinese giant gaming company has been a dominant figure in the domestic market. Despite the government’s strict policies and recent interventions, Tencent is probably the best-equipped company to survive – and thrive on the other side.
For Tencent, the most obvious path to metaverse is video games. Tencent’s CEO Pony Ma hinted that they could create highly interactive games, multiple games under one common IP or infrastructure that enables users to make games.
Tencent is financially well-established and is continuing growth in its core businesses. The revenues during the trailing twelve months have crossed $532 million already, compared to $482 million in 2020. Being a profitable company, TCEHY is a perfect meta stock to bet in the long term.
Unity Software Inc. (U)
Unity Software Inc. (U) operates as a real-time 3D development platform. The company owns one of the two main 3D video game engines. In fact, 94 of the largest 100 game development studios use the Unity engine.
Unity Software is also working on metaverse and will be part of this emerging industry. The company will emphasize content creation, cross-platform access, and narrowing the distance, and reducing the friction between creators and consumers. The gaming company is considered to be one of the main players in the metaverse business.
Unity, after the acquisition of Weta Digital, seems to be well-positioned to capture new revenue streams in the metaverse. Moreover, it is also in a good position to capture revenue streams from both buildings the digital infrastructure of the metaverse, and participating in the NFT economy. However, at over 38 times forward sales and a frenzy of optimism, the stock might be ahead of the near-term fundamentals. While there is still much to explore in the long run.
U stock is improving its financial outcomes every passing quarter. However, the stock price valuation can be questioned. The stock is overbought at the moment. Investors should keep an eye on U stock as it will be a major player in the meta market in the coming years.
Metaverse has just made headlines. Once it is well understood by a normal person, we’ll see meta stocks pump in real terms.