The emergence of extended reality – the intersection of real and virtual environments that includes human-machine interactions using technology and wearable devices – is known as the metaverse. Grand View Research expects the metaverse to grow to a $679 billion market by 2030, giving it a 30% compound annual growth rate.
Many technology companies have rushed to provide the hardware and software needed to build and interact with these virtual worlds. While many metaverse stocks can turn out to be a compelling transformation in this universe, they can find particularly interesting opportunities in platforms (FB -2.11% ) And roblox game (RBLX -0.75% ). Let’s take a closer look at these two metaverse stocks.
With its leading position on Facebook that covers a large percentage of the world’s population, the company formerly known as Facebook is betting on turning into the metaverse. While the name change may ultimately do little for the company, Meta will likely play an increasingly important role in this virtual world.
For one thing, about 2.8 billion users visit one of its social media sites – Facebook, Instagram, Messenger or WhatsApp – every day. This network provides a useful starting point. In addition, it has built a leadership position in virtual reality glasses with its Oculus Quest 2 headset. Powered by Qualcomm chips, this helmet claims a leading position in its market. Additionally, creating the accompanying “Tactile Gloves” gives a sense of the feel, and an experience that can enhance its role in the Metaverse.
Investors should also know that the company generated $118 billion in revenue in 2021, a 37% increase over 2020. Reality Labs, which represents Oculus headphones, has just over $2 billion in that revenue.
Overall, Meta generated a net profit of $39.4 billion that year, up 35% from last year. A 96% increase in its provision for income taxes offset relatively slow growth in costs and expenses.
Despite this growth, the stock price has fallen more than 30% in the past 12 months. Investors battered stocks as earnings growth slowed, and the first-quarter guidance I gave led to the largest loss in market value in stock market history.
However, other metrics indicate that it is time to buy a Meta dip. The decline left the company with a price-earnings ratio of 15, an attractive valuation even if the first-quarter revenue growth forecast of 3% to 11% is met.
All in all, Metaverse offers a wide range of growth opportunities. Between the company’s massive user base and its VR products, Meta can live up to its new name.
Tech giants like Meta aren’t the only companies with potential in the metaverse. Roblox has built a huge social ecosystem with its game development platform. Users can develop and play games on platforms ranging from computers to smartphones to VR headsets. Developers can also earn revenue from games by bringing people together in the metaverse on its social platform. Then there is the virtual currency – Robux – used on the platform which could become a thing more as Roblox delves deeper into the metaverse.
Thanks to its ecosystem, it has attracted about 55 million users. More than half of this user base was under the age of 13 as of last year. However, it is starting to attract increasing interest from the 13+ year olds and is gaining increasing interest on a professional level. For example, the partnership led to Chipotle He developed a virtual restaurant in the metaverse and recently used the platform to promote National Burrito Day.
The growing popularity of Roblox is shown in the financial statements as the company reported revenue of $1.9 billion in 2021, a 108% increase over 2020. Losses of $492 million, compared to $253 million in 2020.
However, with $820 million in deferred revenue, operating cash flow was $659 million. Roblox sees the money in users’ digital wallets (Robux mentioned above) as “deferred income,” and only recognizes income when users spend it. This means that her financial condition is better than her losses might indicate.
However, the company also published its January 2022 results in its annual report. Of particular concern is this month’s booking growth from just 2% to 3% year-over-year, a significant slowdown from the 45% full-year booking growth in 2021 compared to 2020 numbers.
This news, along with a widespread sell-off in tech stocks, caused Roblox’s stock price to drop nearly 70% from its October high. This means that the price-to-sales ratio, which hit 40 last November, is now at an all-time high of 10. However, Roblox’s potential in the metaverse might be a good reason to add stocks to this valuation.
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