7 Stocks to Buy That Have a Shot at Becoming the Metaverse King InvestorPlace - Stock Market News, Stock Advice & Trading TipsMeta Platforms may be betting its future on the metaverse, but these seven stocks may be the best stocks to...
By Thomas Niel
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Meta Platforms (NASDAQ:FB), formerly Facebook Inc., may be betting its future on the metaverse. But if you're looking for stocks to buy that give you exposure to this trend, not only is FB stock far from being your only choice. It may not even be your best choice.
Sure, the meta catalyst isn't the sole reason to buy shares in the social media giant. Following its post-earnings plunge, it has fallen to a low price-to-earnings (P/E) ratio (17x). Today, it is not a stretch to call it a value stock.
Be that as it may, other plays may be more interesting. Either because they have an equal and/or greater chance of dominating the metaverse. Or, they could see a more dramatic move because of this catalyst.
Meta Platforms' FAANG competitors all have a shot at grabbing a large piece of the hardware and/or software market that will arise from the metaverse becoming the next big thing. Some smaller, more specialized names could see a tremendous liftoff in price, as this trend results in a high level of growth.
So, among the names exposed to the metaverse trend, which ones should you consider stocks to buy? Take a look at these seven, a mix of tech behemoths and up-and-coming names setting their sights on this space:
- Apple (NASDAQ:AAPL)
- Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)
- Microsoft (NASDAQ:MSFT)
- Matterport (NASDAQ:MTTR)
- Netflix (NASDAQ:NFLX)
- Sony (NYSE:SONY)
- Unity Software (NYSE:U)
Stocks to Buy: Apple (AAPL)
Not too long after Facebook "went Meta," the market began to buzz about the potential for other big tech names to profit from this trend. Naturally, Apple was brought up as a top company that stood to benefit from the mass adoption of augmented reality (AR)/virtual reality (VR) hardware.
Albeit, perhaps not as a first mover in the space. As analysts at Morgan Stanley opined, the company has and would likely continue to slowly move into this area. However, this is far from a negative, and in fact could be a positive. In their research note on the topic, the same analysts argued that the company took its time to enter the smartphone market (2007), with big success.
Fifteen years later, the iPhone is ubiquitous. Meanwhile, early 2000s market leaders BlackBerry (NYSE:BB) and Nokia (NYSE:NOK) are better known to younger generations as meme stocks than as phone makers. That's not to say that Facebook/Meta will go the way of Blackberry or Nokia. But Apple's gradual move into AR/VR equipment is by no means a sign it'll "miss out" on this opportunity.
Admittedly, with its $2.7 trillion market capitalization, a move into metaverse hardware may not be a big needle mover for AAPL stock. Many catalysts (like the development of its own line of electric vehicles) will likely be necessary to fuel its next big move. Yet if you're worried that shares have peaked, keep in mind that its metaverse, EV and other growth plans could help keep shares performing solidly in the years ahead.
Alphabet (GOOG, GOOGL)
The parent company of Google hasn't decided to change its name once again, to keep with these more meta times. But Alphabet, like Meta Platforms and the other FAANG components, is another contender in the battle to dominate the AR/VR market.
Sure, for now we only have a general idea of how it plans to become a major metaverse player. Yet on the conference call following its most recent earnings release, Alphabet's CEO, Sundar Pichai, provided some vague remarks indicating its plans to pursue opportunities in this space.
For instance, the company is at work to bring out virtual world versions of its platforms. These include Google Maps and YouTube. Pichai also remarked "we've been investing there a long time," when fielding a question about what it's up to in the AR equipment market.
Like Apple, it's another member of the trillion-dollar club, with plenty of cash to invest more into this technological arms race. Also like AAPL stock, the meta catalyst may only have a moderate impact on the price of GOOG stock. Still, as this is another factor in its favor, atop the other positives cited by Louis Navellier, which demonstrates why it makes for a great long-term holding.
Microsoft (MSFT)
Just like Apple, Alphabet and Meta, Microsoft is in the running for the metaverse crown. It has been at work on developing metaverse hardware. The software and video gaming behemoth also cited the metaverse as a reason behind its plans to buy Activision Blizzard (NASDAQ:ATVI).
Like the FAANG names, Microsoft has big plans to pursue and find success in this market. That said, while it has its own meta ambitions, that doesn't mean it hasn't been facing challenges/hiccups in its pursuit.
Recent reports have detailed issues with its HoloLens line of AR/VR headsets. The company's Xbox platform is also behind the eight ball when it comes to virtual reality gaming. While it may be using the Activision deal as a springboard to move into meta gaming, it's too early to say this will result in success.
So, with its meta plans a little more up in the air, why consider this one of the metaverse stocks to buy? I wouldn't buy it on its meta exposure, per se. The company's strengths remain with its Azure and Office365 lines of business. Yet it could still prove the skeptics wrong. Doubling down on gaming, and betting on the virtual could pay off for it. In turn, this could give MSFT stock a nice, unexpected boost.
Stocks to Buy: Matterport (MTTR)
Last fall, speculators got ahead of themselves with MTTR stock. They sent it "to the moon," due to the perception it would benefit greatly from the metaverse's rise. But the "meta mania" surrounding it didn't last long.
Since November after hitting a high of $37.60 per share, Matterport has tumbled more than 80%. It now trades for around $7 per share. One one hand, that's bad news for those who got in the near-term. On the other hand? It's possibly a great opportunity for those sitting on the sidelines until now.
Sure, this is a secondary catalyst for the company, which is primarily a provider of software that enables users to produce "3D "twins' of real estate assets." It needs to focus on scaling up its main business, before it tackles the meta frontier. Also, although down heavily from its high water mark, the stock continues to sport a high valuation. At today's prices, it trades for around 13.5x estimated 2022 revenue.
With this, the near-term could remain difficult. Investors are still shying away from richly priced, speculative growth stocks. The market may also want to see how its move to a SaaS-based revenue model shakes out. However, with its main and secondary catalysts giving it a high amount of potential runway? You'll want to keep this on your watchlist.
Netflix (NFLX)
You may be wondering, what makes a streaming company one of the best metaverse stocks to buy? Good question. When you think of Netflix, you probably still see it as a play on big tech beating big media at its own game. First, by beating them to the chance with distribution. Then, beating them in terms of content production.
Although the company hasn't thrown its hat in the ring when it comes to building a virtual world, or even the equipment to access it, that's not to say it will not make further moves into this space. For starters, Netflix has already moved into a metaverse-adjacent area, video gaming, seeing it as its key to growth, as its streaming business matures.
Also, last year the streaming king hired Mike Verdu, formerly in charge of Facebook/Meta's AR/VR content division. Yes, it's not exactly clear to what extent it will "go meta" in the years ahead. Yet even if it doesn't bet big on this area, moderate moves into the metaverse could be exactly what NFLX stock needs to get out of its current rut.
Tumbling in January, due to a miss on its subscriber numbers, and the broader selloff in tech, shares have struggled to recover. Success in areas beyond video streaming could convince the market to dive back into Netflix shares.
Sony (SONY)
Japanese electronics giant Sony is certainly not sleeping on the metaverse opportunity. Its PlayStation unit has made far more progress in AR/VR gaming than Microsoft's Xbox unit.
Back in 2016, it first came out with its line of PlayStation VR gear. At the time, it was priced competitively compared to Facebook's Oculus Lift offering. However, with price cuts and advancements with Facebook/Meta's products, plus the possible entrants of other tech giants? You may be skeptical that this company, more mature and slower moving, will be able to withstand the rising competition.
Then again, you may not want to discount its chances. Mainly, with its seamless capability with PlayStation consoles, right off the bat it has an advantage Meta doesn't have with its offerings, like the newly released Quest 2.
If meta gaming becomes more popular, with PlayStation users opting for Sony's VR equipment over Meta's VR equipment? The company may be able to regain the AR/VR hardware market share lost over the past two years.
Even as its victory (or at least coming close to victory) in this space may be a bit of a longshot, you may still want to consider SONY stock a metaverse stock to buy.
Stocks to Buy: Unity Software (U)
Sure, it's a bit of a stretch to say Unity Software will gain "metaverse king" status. Yet the company, which provides software used to produce 3D content, will definitely have a seat in the king's court. Not to mention, the court of many would-be kings too.
This points to high-growth ahead for it over the next few years. Analyst estimates call for its sales to rise 33.1% this year, and by another 29.6% in 2023. However, while its prospects are very bright, with accelerating demand for its platform, you wouldn't be able to decipher that from the recent performance of U stock.
As I mentioned recently, Unity Software stock is down around 50% from its highs. The cycling out of expensive growth stocks, caused by the pending rises to interest rates, is largely to blame for this. It continues to trade for a high multiple, which again may suggest more downside in the near-term.
Then again, it's not a foregone conclusion that the "worst has yet to come" with the tech selloff. Keeping market conditions in mind, it's wise to be careful. Nevertheless, if you're looking for a play with exposure to the metaverse, no matter whether it's Meta Platforms, or another tech giant, that winds up ruling it, it may be worth it as a long-term play.
On the date of publication, Thomas Niel 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.
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