Which Companies Are Investing in the Metaverse? 7 Stocks to Watch.
Alphabet GOOGL, GOOG) — Tech giant pouring funds into creating another growth unit.
Meta (FB) — Leader in social media and owner of Oculus virtual reality (VR) platform.
Nvidia (NVDA) — Powering all things technology and not missing out on the next growth opportunity.
Roblox (RBLX) — Online gaming platform that will leverage metaverse for more immersive community.
Snap (SNAP) — Already uses augmented reality (AR) for its social media platform.
Microsoft (MSFT) — Incorporating metaverse features for its current platforms and recently acquired Activision Blizzard (ATVI).
Adobe Systems (ADBE) — A powerful cloud-based graphics company that can help many companies (like Nvidia can) move to the metaverse.
Source: allme3d / shutterstock.com
A few quarters ago, the metaverse became a serious talking point. Facebook changed its name to Meta (NASDAQ:FB) and quickly, seemingly every tech company was mentioning it on their conference calls and product announcements. It appeared to come out of left field, but only in the sense that it became popular. Many companies — particularly those in the gaming world — have been talking about the metaverse for a while now.
In my opinion, cryptocurrencies and non-fungible tokens (NFTs) have only fueled the move into the metaverse. It’s encouraging those already in the digital world platform to create more environments and products.
The metaverse is being built as an alternative digital world where consumers and customers can interact and even own digital products. Much like the internet opened up a vast new world of opportunity, creators and companies are hoping the metaverse can do the same thing. It’s why we’ve seen such a sudden flux of investment dollars into the industry.
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FB (soon META)
Meta (formerly Facebook)
Alphabet (GOOGL, GOOG)
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Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) is known mainly for two things: Google and YouTube. Aside from operating the top two websites in the world, the company has found ways to explore other opportunities as well.
One area that it has struggled though? Social.
Google Plus went the way of Geocities, as it was shut down after failing to find any meaningful momentum. Despite other opportunities to make acquisitions in this field, Alphabet’s failed Google Plus project seemed to haunt it.
Perhaps no more, though.
Given some of its more popular platforms — like YouTube, Google Earth, Maps, etc. — this could actually be a prime company for the metaverse. Plus, it continues to work on its AR applications, creating a potentially powerful combination for the metaverse. Management has talked about the opportunities in this space lately, acknowledging the potential that they have.
…just like you speak to people, you see, and interact, computers will become more immersive. They’ll be there when you need it to be. So, I have always been excited about the future of immersive computing, ambient computing, AR.
Source: Blue Planet Studio / Shutterstock.com
Meta is such an obvious choice for the top metaverse stocks, but in the case of the company formerly known as Facebook, its existence may depend on it. Unlike many other companies, Meta lives and dies by social media. The moment there is something better, consumers won’t hesitate to spend more time somewhere else.
Sure, Meta will still ride high on the revenue and profit generated by Facebook and Instagram where it has more than two billion combined monthly users. However, as we’ve seen from other social mediums, other platforms can gain momentum quickly. That’s created an existential need for Meta to figure out its future.
Management has talked about its planned move to the metaverse and given the direction of social media, that’s a wise move. It’s particularly helpful that Meta also owns the Oculus brand, a VR-based headset company.
Full immersion in the metaverse is certainly something that could ultimately separate Meta from the rest of the pack. And now its stock trades at a very low valuation after falling more than 50% from the high to its recent low.
Source: Konstantin Savusia / Shutterstock.com
Nvidia (NASDAQ:NVDA) has its hands in everything. That’s why it’s been one of my favorite and top investments over the last several years and why I believe it continues to have even more upside. It’s also why I believe it will eventually reward long-term shareholders with a $1 trillion market capitalization.
Nvidia’s business reaches cloud computing, datacenters, artificial intelligence and machine learning, video games, graphics, autonomous driving, robots, drones and now, the metaverse.
This one is a multi-pronged approach.
On the one hand, most of these companies would struggle to put out a metaverse product without Nvidia. That is to say, without the graphics power, datacenters or cloud computing, I would argue that the metaverse would struggle to exist. Sure, they could use Advanced Micro Devices (NASDAQ:AMD), but AMD can only do so much.
I believe that will continue to drive revenue and earnings for this company. From a prior article on InvestorPlace:
The company is going to be a key part of the metaverse’s infrastructure. It even has its own metaverse platform in Nvidia Omniverse, a project that spent 2021 in beta but officially launched at CES 2022.
Source: Miguel Lagoa / Shutterstock.com
Roblox (NYSE:RBLX) is a bit more obvious of a choice when it comes to metaverse stocks. Despite its $30 billion market cap — even with shares 65% off the all-time highs — many investors still aren’t familiar with this company.
Little do many know, this company has been around since 2006. The platform is insanely popular, using video games to bring together a community. From the company:
Roblox’s mission is to bring the world together through play. We enable anyone to imagine, create, and have fun with friends as they explore millions of immersive 3D experiences, all built by a global community of developers.
When the company reported earnings mid-February, Wall Street booed its results. However, the platform’s engagement continues to grow. The company’s daily active users (DAUs) reached 49.5 million last quarter, up 33% year over year. Further, engagement hours rose by 28% year over year to 10.8 billion hours.
Given the way Roblox already operates, it’s a perfect candidate to include in a group metaverse stocks.
Source: Ink Drop / Shutterstock.com
Snap (NYSE:SNAP) is another perfect candidate to include in our metaverse stocks. Why? Because it already fits into two key areas: social and AR.
The company’s social media business is clear and obvious. Its Snapchat platform has generated very strong growth is pertains to users and revenue. Having a social community is essential for the metaverse.
Second, Snap has been working on its AR segment for years now. Known as Spectacles, it’s the company’s “first pair of glasses that bring augmented reality to life, redefining how we interact with and overlay computing on the world.” Based on the marriage of these two technologies, Snap is well-positioned to benefit on a move toward the metaverse.
Further, it’s one strong rally away from shaking off the bear market it’s entrenched in. Shares roared higher by 58.8% on Feb. 4 when the company reported earnings and it wasn’t as bad as feared. Growth stocks were in a fragile state at that point, but that reaction served as a reminder that Snap still has more potential.
Source: Asif Islam / Shutterstock.com
Microsoft (NASDAQ:MSFT) stock is another name to consider. Like a few others, this is a multi-pronged approach.
The company’s Teams platform allows for collaboration and video conferencing. As the world continues to shift to a remote-working environment, Teams and other collaboration platforms should only continue to grow. Many people only think of metaverse stocks as a de facto way of saying “gaming stocks or social media stocks” and that’s simply not the case. Microsoft Teams could showcase just that with an interactive digital world for meetings and collaborations.
However, the company has other platforms to consider as well. Let’s not forget about Microsoft’s LinkedIn platform and let’s certainly not forget that Microsoft just committed $68.7 billion to acquire Activision Blizzard (NASDAQ:ATVI).
Activision makes some of the most popular video games in the world and its potential in the digital world still has a long way to go.
Source: JHVEPhoto / Shutterstock
Last but not least, I have one more atypical pick for the metaverse stocks list: Adobe Systems (NASDAQ:ADBE).
Not long ago, Adobe stock was doing just fine. However, the stock is now down almost 40% from the highs it made in November. Bulls were hoping its recent earnings report on March 22 would help bring the stock back to life. Instead, they were met with a one-day 9.3% decline in response to the quarter.
While the company beat on earnings and revenue expectations, guidance for next quarter was a little light and that’s what weighed on the stock. Interestingly though, the company mentioned the metaverse during the quarterly call. David Wadhwani, President of Digital Media, said:
… we’re advancing new media types like 3D and immersive for the emerging metaverse platforms. We’re building applications for every surface and every audience across web, mobile and desktop.
We are also seeing tremendous interest for Substance 3D and our new 3D Modeler beta as brands bring together the physical and digital worlds and begin their journeys to become metaverse-ready.
So like Nvidia, Adobe may not have the platform where users go to “hang in the metaverse,” but it’s one of the foundational building blocks for it to exist. Now shareholders have an opportunity with the stock on sale.
On the date of publication, Bret Kenwell held a long position in NVDA and ADBE. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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