Last year, the metaverse was a hot topic as speculative investors cheered for the possibility of creating a vast VR world that is supported by cryptocurrencies. The enthusiasm has died down as notable efforts such Meta PlatformsHorizon Worlds Decentraland It was a slow death.
In response to increasing interest rates, investors opted for more conservative investments. The market seemed to have lost interest in metaverse-related stocks. These three stocks provide some exposure to the metaverse for investors, despite that downturn.
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1. Autodesk
Autodesk (ADSK -0.88%) AutoCAD is the most well-known product of Autodesk. However, it also offers a wide variety of cloud-based software that can be used by architects, engineers and manufacturers. Autodesk has many essential tools for building digital worlds within this metaverse.
Autodesk’s Maya 3ds Max and Mudbox applications can be used to create 3D animated special effects and animations for movies, TV shows, and VR software. Epic Games recently integrated Revit, which is a building modeling tool into its Twinmotion 3D visualization platform. This partnership proves that the metaverse doesn’t just exist for games. It allows professionals to work together on 3D models in real time.
Autodesk stock dropped 30% this year due to investors’ concerns about the company’s slowing growth. It expects its revenue growth to be 14% this year compared to the 16% growth in fiscal 2022, fiscal 2021. Analysts predict a 10% increase in fiscal 2024. The slowdown is attributed to macro and pandemic headwinds, a higher mixture of shorter-term contract that generates lower upfront payments and geopolitical challenges within Russia.
Autodesk is still profitable and its net revenue retention rate is above 100%. The stock’s forward earnings are 27x. This stock is a good choice for investors who are looking to make a balanced bet on the metaverse. They will also get exposure to mission-critical engineering, manufacturing, and architecture sectors.
2. Sony
The Japanese conglomerate Sony (SONY -0.38%) The gaming division is also expanding into the metaverse. It generated 26% and 12% respectively of its operating incomes in the latest quarter. Sony’s PSVR headsets, which can be tethered with the PlayStation consoles and allow game developers to add VR features to their games, have been a great entry point to the metaverse.
The PSVR’s first version, launched in 2016 for the PS4, sold 5 million units by 2020. The second-generation PSVR 2 will be launched by Sony in February 2023. The new headset will retail for $550, as opposed to the original model’s $400 launch price. This seems high considering that the PS5 cost $500. However, Sony’s decision for a new headset shows it still believes there are brighter days ahead for VR and metaverse markets.
Sony’s other businesses include movie, music, and image sensors. They are currently recovering in a post-pandemic environment. Although it expects to see a 17% increase in revenue this fiscal year, its net income will drop 5% due to a lower mix and higher-margin first party games, licensing fewer shows and movies to streaming media platforms and dealing with difficult currency headwinds. Sony is still a bargain at 16 times its forward earnings.
3. Apple
Lastly, Apple (AAPL -1.46%) The metaverse will soon welcome a mixed-reality (MR), headset that combines augmented reality with virtual reality. It is widely expected to arrive next year. Although not much information is available about the device, recent rumors suggest that it will be lighter than current Quest headsets and more powerful.
Apple has frequently disrupted markets that it did not create. Although Apple is often credited with popularizing MP3 players and smartphones, tablets computers and smartwatches it was only able to enter these markets after other companies had already tested it. Apple could achieve the same feat with MR headsets. This would allow it to diversify its revenue stream away from its iPhone business (47% of its last quarter sales), while tethering more customers to its services ecosystem.
Apple’s forthcoming headset could become the core of its own metaverse, if it gathers enough momentum. Apple could launch new apps and subscriptions services on its new computing platform, which would go beyond the core iOS, macOS or watchOS platforms, as well as Apple TV and Apple TV.
It’s speculation at this point, but Apple continues to be a resilient business. Analysts anticipate that the company’s earnings and revenue will rise by 3% and 2 percent this year. This is after it finishes its 5G upgrade cycle, which it will complete in 2021. It will then accelerate in 2023 to roll out new products, services, and other innovations. Its stock is reasonablely valued at 22 times its forward earnings. The $169 billion it has in cash and marketable securities make it a safe stock for tech companies to keep as rising rates punish those with poor liquidity.
Randi Zuckerberg is a former director for market development and spokeswoman at Facebook. She is also the sister of Mark Zuckerberg CEO of Meta Platforms. Leo Sun holds positions in Apple and Meta Platforms. The Motley Fool holds positions in and recommends Apple and Autodesk. The Motley Fool recommends these options: March 2023 $120 Apple calls and March 2023 March 2023 $130 Apple calls. The Motley Fool follows a disclosure policy.
