2 Monster Metaverse stocks to buy long-term
The metaverse has become one of the next big growth areas in technology. Strategic Market Research estimates its market size could reach $1.6 trillion by 2030, a compound annual growth rate (CAGR) of 38%.
This level of growth is likely to turn many investments in multiple tech sub-sectors into metaverse stocks. But two stocks, in particular, are expected to generate outsized returns from the metaverse – Unit software (U -17.45%) and Focus on video communications (ZM -6.46%). Let’s find out a bit more about these two monster metaverse stocks with long-term growth potential.
1. Unity software
Unity is expected to thrive on interest from the metaverse, as it specializes in providing many of the tools the industry needs to grow. Its software, originally designed for high-level video games, helps developers build representations of 2D and 3D spaces. It is a market leader among video game developers who are adept at creating metaverse-like environments.
But the interest in Unity goes far beyond simple gaming. The architecture, film, robotics, construction and automotive industries can all create applications that rely on Unity. An example that speaks to both automotive and construction capabilities was released in January as Hyundai engine announced a partnership with Unity to develop a “digital twin” of an existing automotive plant to use in efforts to improve plant operations.
In the first quarter of 2022, Unity posted record revenue of $320 million. While this represents a 36% year-over-year gain, it does signify some deceleration from revenue growth of 44% in 2021. Additionally, cost of revenue and operating expenses have increased at a faster pace primarily due to stock-based compensation expense and amortization. intangibles. When these factors are not taken into account, non-GAAP (generally accepted accounting principles) net losses were $25 million compared to $27 million in the prior year quarter.
Additionally, the company expects revenue of $1.35 billion to $1.425 billion for the whole of 2022. metaverse stock. Investors did not react well as Unity’s stock price fell more than 80% from its 52-week high in November.
But investors should also remember that it took Unity’s price-to-sales (P/S) ratio to 10. This level is near an all-time low and likely prices in slowing growth. Ultimately, Unity’s difficulties appear to be temporary, given the bright future of its emerging metaverse growth engine.
2. Zoom Video Communications
Zoom is arguably the most unexpected metaverse game here. This stock has become a pandemic darling as a locked-in population has turned to Zoom for office meetings and personal communications.
Now many jobs have left the office for good, and when workers separated by distance need to meet, they start to turn to the metaverse for help and do so via Zoom.
Zoom has developed a virtual reality-based experience that can make two people across the world feel like they’re in the same room. The company has also added a whiteboard capability that allows everyone in the meeting to see the same visuals. Such innovation should help Zoom maintain the 75% market share it holds in the video conferencing industry, according to Datanyze.
And even though revenue has slowed from pandemic peaks, revenue in its first fiscal quarter of 2023 (ended April 30) grew 12% year-over-year to nearly $1.1 billion. . Since it invested heavily in itself, spending on research and development and sales and marketing drove up operating expenses by 34% during the period, resulting in a 50% decline in net income to 114 millions of dollars.
True, growth may not improve immediately. But an intriguing prediction came from Cathie Wood, who made Zoom the No. 1 position in the ARK Innovation ETF. Wood has set a price target of between $700 per share and $2,000 per share for Zoom by 2026. Given Zoom’s more than 80% drop to $110 per share, some analysts believe Wood is wrong almost certainly on its growth levels.
However, with the P/S ratio nearing its all-time low at just eight, the stock price likely reflects its challenges. As an online meeting ecosystem grows in the metaverse, it will likely increase Zoom’s stock over time.
Will Healy holds positions in Zoom Video Communications. The Motley Fool holds posts and recommends Unity Software Inc. and Zoom Video Communications. The Motley Fool has a disclosure policy.