The concept of the metaverse – essentially an immersive virtual world enabled by computing technology – has been around for decades. The phrase was first coined by science fiction author Neal Stephenson in his 1992 novel. snow crash. But it's only in the last few years that the metaverse has become an investable trend, as computing technology has advanced rapidly and high-tech companies have really started pouring significant financial and engineering resources into the metaverse.
To be clear, from an economic perspective, the Metaverse is still in its infancy. This raises the following questions: As the Metaverse expands in scope and influence, which Metaverse stocks are the most attractive right now?
I think these three Metaverse stocks are worthy portfolio candidates.
Fast-growing video game development platform
Traders initially objected, but unity software's (U -5.45%) Although the November quarter was technically weaker than expected, patient long-term investors had plenty of reason to rejoice.
The video game development platform provider experienced solid growth with revenue of $544 million, up 69% year-over-year, placing it right in the middle of management's guidance and achieving a Net loss more than halved to $125.2. $1 million, or $0.32 per share, compared with $253 million, or $0.84 per share, in the prior year period. But Wall Street simply set the bar too high for the report. Most analysts were too optimistic in modeling that his net loss per share was even narrower at $0.17 on revenue of $553.7 million. Sales would have been well above the high end of Unity's guidance range.
Why is Unity an attractive purchase now? Unity just introduced new runtime pricing for its Editor product in September, and this transition management will make the Create Solutions division a sustainable business. It has been described as a “key step” for the
Although Unity acknowledged that the introduction of the new rates had “caused friction and short-term headwinds with customers,” the company also said the effects of the new rates would be “minimal in 2024, with customers adopting The company also predicted that it would increase from there as the situation progresses. [Unity’s] New release. ”
If that prediction is true, and considering Unity, already Free cash flow is on track to be positive (free cash flow was $104 million last quarter), and the company should be poised to enjoy even greater operating leverage as it scales.
The tech giant formerly known as Facebook
Facebook's company name meta platform (meta -1.62%) Founder and CEO Mark Zuckerberg has insisted that Metaverse is the future of his company, and the social media giant is still pouring billions of dollars into MetaQuest AR every quarter. /We are developing a metaverse through a VR (Augmented Reality/Virtual Reality) headset. and corresponding software ecosystem.
Meta's Reality Lab division generated operating losses of more than $9.4 billion on revenue of just over $1.4 billion through the first three quarters of 2023. And management told investors in late October that the division's operating losses would “increase significantly” in 2024. A combination of continued product development in the AR/VR space and additional investments to further expand the ecosystem.
At these early stages, it's easy to dismiss these investments as a waste of money. But it's also worth noting that the company, which serves more than 3 billion monthly active Facebook users, not only owns Instagram and WhatsApp, but also generates nearly $11.6 billion in net income. Only the last quarter. Therefore, the meta can easily afford to absorb the initial losses arising from investments in the metaverse.
For investors who want to bet on the metaverse's final inflection point, the meta could still be a big winner in the coming years.
Main beneficiaries of the metaverse economy
As long as the discussion is about virtual worlds, it is very likely that cryptocurrencies will play an increasing role in the digital economy as the metaverse expands.For those who don’t necessarily want to invest in cryptocurrencies themselves, crypto exchange platforms coinbase global (coin -6.85%) It might be the perfect option.
The Metaverse industry is still young, so betting on Coinbase as a Metaverse stock may seem premature. However, Coinbase has also made significant strides in ensuring its core crypto business takes steps to ensure sustained profitability during that time.
Coinbase has been able to generate positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in each of the past three quarters despite historically low volatility in the crypto space. This is a major headwind for companies that benefit from higher levels of cryptocurrencies. transaction. This achievement enabled management to pivot in early 2023 to become a company that can generate adjusted EBITDA in all market conditions.
As the crypto industry matures, we expect Coinbase to become a highly volatile stock. But patient long-term investors who want to watch the company's growth story unfold will be much happier if they open or add to a position today.
Randi Zuckerberg is a former Facebook head of market development and spokesperson, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool's board of directors. Steve Symington has no position in any stocks mentioned. The Motley Fool has positions in and recommends Coinbase Global, Meta Platforms, and Unity Software. The Motley Fool has a disclosure policy.