A witches’ brew of macroeconomic factors – decades-high inflation, high interest rates, and fears of a global recession – has had a profound effect on the stock market in 2022. Add to that Russia’s invasion of Ukraine, record prices at the gas pumps, crashing cryptocurrencies, and the global COVID-19 pandemic that refused to fade away, and the situation for investors is clearly becoming a confusing mess. So, where do you look for growth? The answer is the metaverse.
With many of the tech companies driving the metaverse suffering significant pullbacks in stock value in 2022, the opportunity for investment is considerable.
The key will be to choose stocks that are set to benefit most from the rush to the metaverse. Many companies have sensed the excitement and have made moves to be part of the next big thing. But only a few are actually going to be integral to the metaverse and reap big rewards.
Here are some metaverse stocks that are set to be big winners in this next wave of technology.
Snap
Industry: Internet content & information
Market value: $17.2 billion
A lot of analysts remain bullish on Snap (SNAP), even with shares plummeting 78% for the year-to-date and the reports of disappointing second-quarter results.
The top and bottom-line misses in Q2 came as “difficult macro conditions drove an advertising slowdown in a lot of industry verticals,” according to BofA Global Research analyst Justin Post. But Post maintains a buy rating on the stock.
“We are still constructive on the stock because of Snap’s leading user growth, under-monetized surfaces, and long-term average revenue per user (ARPU) expansion opportunity, which positions the stock nicely for an eventual sector recovery,” says Post, adding that SNAP shares are trading at an attractive valuation after their recent slide.
Snap continues to focus on developing augmented reality hardware through its Spectacle smart glasses that allow for the augmented reality experience many people are seeking.
Meta Platforms
Industry: Internet content & information
Market value: $449.1 billion
Meta Platforms (META) brought a lot of attention to the metaverse when it changed its name from Facebook to Meta. The company has big plans for monetizing the digital world.
In a CNBC interview in June, Meta CEO Mark Zuckerberg laid out his vision:
“We hope to get to around a billion people in the metaverse buying digital goods, digital content, and different things to express themselves.”
Analysts have several concerns about Meta, including young users abandoning Facebook and the potential of regulatory measures being introduced as a result of ongoing government investigations. Despite these challenges, with META stock in a slump (shares have plummeted by 50% for the year-to-date), the potential for significant long-term growth occurring due to its metaverse strategy is very real.
Apple
Industry: Consumer electronics
Market value: $2.65 trillion
So far, Apple (AAPL) has played the long game on the metaverse, and it seems that the company’s endgame will soon be revealed.
In 2017, Apple began to officially embrace AR with the release of its ARKit development tools. The company has also been quietly working on an AR headset for years. It was reportedly demonstrated to the board of directors earlier this year.
Apple CEO Tim Cook has talked up the technology for years. “We could not be more excited about the opportunities we have seen in the space. Stay tuned, and you will see what we have to offer,” Cook told China U.S. Daily back in June.
Apple is expected to release its long-awaited AR headset in early 2023. When that happens, expect them to weaponize the roughly 1.8 billion Apple devices in active use globally with pitches to buy the headset and related services.
Nvidia
Industry: Semiconductors
Market value: $443.4 billion
Some of the biggest names in tech will benefit greatly from the mega infrastructure requirements of the metaverse, and still more will sell hardware that connects to the metaverse for a superior experience, including headsets, PCs, and game consoles.
One of the companies set to reap the rewards on all these fronts is Nvidia (NVDA). The company makes graphics cards that are in gaming PCs, advanced GPUs used for high-performance servers, custom chips found in game consoles, and chips that are used to power the most advanced AR headsets.
In addition, the company has its omniverse content creation platform, which creators already use to build 3D content and simulations.
With semiconductor stocks down nearly 40% this year, the opportunity of investing in a metaverse building block is certainly tempting.
Walt Disney
Industry: Entertainment
Market value: $198.7 billion
Walt Disney (DIS) saw its share price slide by nearly 30% in 2022. But all is not lost.
Disney’s chances of growth in the metaverse are quite significant. The company will not be building technical infrastructure, nor hardware for accessing virtual experiences. It is the world’s largest publicly traded media and entertainment company and owns franchises like Marvel and Star Wars.
When it comes to content like themed worlds and AR entertainment, you can expect Disney to be a dominating presence.
That will eventually be reflected in DIS share prices – making it one of the top metaverse stocks to watch in the future.
Match Group
Industry: Internet content & information
Market value: $19.3 billion
2022 hasn’t been kind to Match Group (MTCH) stock. Shares are down more than 48% this year, but the company has big plans for the future. Their new CEO took over in May, and in the second-quarter earnings release, the company announced that it is replacing the head of Tinder and will reorganize the segment’s management team.
The big upside for MTCH stock could well be the metaverse. Last year, the company announced its biggest-ever acquisition, spending $1.73 billion to acquire Korean startup Hyperconnect. That bought them an avatar-based dating experience and “Single Town,” a virtual space for meeting.
Amid the recent shake-up, the company’s plans for a virtual dating environment and Tinder Coins (the in-app currency) have been scaled back. “We will continue to evaluate this space carefully and will consider moving forward at the appropriate time when there is more clarity on the overall opportunity and we feel we have a service to offer that is well-positioned to succeed,” the CEO Bernard Kim wrote in the Q2 shareholder letter. “I love the idea of digital goods and currency on Tinder, but I believe it has not been approached in a completely logical way,” he said. “While it is frustrating to pause the efforts, I think it is super important that Mark (van Ryswyk, the chief product officer) and I give the right value proposition so that this can be a long-term revenue stream.”
Meanwhile, MTCH’s sharp decline in 2022 allows investors to scoop up one of the most promising metaverse stocks at big discount prices.
Alphabet
Industry: Internet content & information
Market value: $1.53 trillion
Google’s parent company, Alphabet (GOOGL), is a good example of a tech giant positioning itself to be a winner in virtually every aspect of the metaverse.
The cloud – with data centers that are packed full of servers – will be key to the metaverse succeeding, and it’s where those virtual worlds would be hosted. Google owns a 10% share of the cloud infrastructure market, making it the third biggest player after Amazon.com (AMZN) and Microsoft (MSFT).
The early release of the Google Glass AR headset was far from a commercial success. However, Google has continued to build its IP for AR and VR headsets since then. The company is said to be working on an augmented reality headset operating system. In early 2022, it acquired Raxium, a company that makes micro-LEDs used in AR and VR headsets. In terms of entertainment, Google already has YouTube VR up and in operation.
“We believe there are significant opportunities for greater connected device usage as well as enhanced advertising around AR glasses. Google has inherent advantages in these areas given its advanced AI/ML capabilities,” stated BofA Global Research analyst Justin Post. “We would expect an AR product launch in the next two years.”
GOOGL is down nearly 20% so far in 2022, and challenges include weaker-than-expected paid search revenue. This has created an opportunity to scoop up one of the most promising metaverse stocks at a discount price.
Amazon.com
Industry: Internet retail
Market value: $1.42 trillion
When it comes to the e-commerce giant Amazon.com (AMZN), the name of the metaverse game is cloud infrastructure. The company fully dominates this area. Amazon Web Services (AWS) has a 33% share of the cloud infrastructure market, and a large chunk of money that will be spent on hosting virtual worlds will likely end up in Amazon’s coffers.
You can count on Amazon to make use of its e-commerce presence in the metaverse, as well as taking advantage of ad revenue opportunities.
But Amazon shares have dropped by nearly 19% this year. The company faces a range of challenges, including inflationary pressure, supply-chain issues, and gas prices that have affected delivery costs.
The recent pain for AMZN stock certainly makes it an attractive option for investors looking for stocks set to benefit when the metaverse gains steam.
Microsoft
Industry: Software – infrastructure
Market value: $2.09 trillion
Microsoft (MSFT) is a no-brainer when it comes to investing in metaverse stocks. The company’s Azure web services are second only to Amazon for market share. Nearly 75% of PCs globally run Microsoft Windows. The company has a highly successful video game division, which includes Xbox game consoles and the Xbox Live network. It also owns one of the biggest proto-metaverse properties in Minecraft. It is currently in the process of acquiring the video game giant Activision Blizzard (ATVI), which owns other early metaverse properties, such as the game World of Warcraft.
Microsoft was a pioneer in AR headset development with HoloLens – which landed them a deal with the U.S. Army valued at up to $21.9 billion. But the head of the HoloLens division resigned earlier this year after accusations of inappropriate behavior were brought forward. At this point, Microsoft is said to be pondering the entire project’s future.
However, investing in Microsoft offers an opportunity to take advantage of their strong position in metaverse development – even with its AR headset ambitions in question.
MSFT shares are down almost 17% for the year-to-date, and it looks like an attractive time to pick up the stock at a relative bargain.
