- Facebook’s name change and pivot to focus on the metaverse is yet to convince investors.
- There are other stocks that could capture a lot of value even if Meta continues to struggle.
- Maxim Manturov at online stockbroker Freedom Finance Europe makes the case for three top picks.
With Facebook’s pivot to focus on the metaverse yet to convince investors, some may be questioning whether the whole investing narrative around virtual worlds is a dud.
If one of the biggest companies in the world has changed its name to Meta and announced it will shift its focus to virtual worlds, but its share price has flopped, then maybe the whole thing is a non-starter as an investment, many may think.
That would be premature though, and missing the bigger picture. Just because a company grabs “Meta” as its name it does not make it representative of the whole theme, and short-term price falls don’t necessarily mean a company is in trouble in the longer term.
It’s clear that work, social life and our money are increasingly becoming integrated with the internet, and this is a trend that is not going away. There are many companies that could tap into the revenue streams created by increased participation in virtual worlds better than the rebranded Facebook.
“Over the next few years, we will probably all be working, playing, communicating, and investing in this overarching ecosystem,” said Maxim Manturov, head of investment research at online stockbroker Freedom Finance Europe. “Tech companies will be working hard on accessories that will take the metaverse experience to the next level, such as with next-generation virtual reality headsets, controllers and other hardware.”
“In 2022, the metaverse is likely to transition into a business phase, introducing a wide range of services, he continued. “With the combination of virtual reality (VR) and augmented reality (AR), the metaverse offers companies many practical benefits beyond the usual teleconferencing services.”
Manturov has identified three stocks which could capture this value very effectively. One is a company everyone knows, one is a pretty big tech name and one is more under the radar. We break down his analysis on each below:
“Regardless of who ultimately leads the development of the metaverse and what form it will eventually take, we know that the number one requirement will be unprecedented computing power – power that must mostly come from the cloud, Manturov said. “That means potential opportunities for Amazon AWS. As a result companies across many industries could look to AWS for their on-demand cloud computing solutions.”
“VR and AR will require mobile edge computing and cloud-based gaming solutions, such as with Nvidia Grid vGaming, which can support up to 160 PC games simultaneously,” Manturov said. “The Nvidia RTX server can easily meet high power and compute requirements, and thus Nvidia will generate high revenues from hardware sales over the next few years, in addition to growing revenue from cloud game subscriptions.”
“For smaller companies like Unity (or Roblox), the metaverse creates more accelerated growth opportunities, which was momentarily reflected in the price and interest from investors. Unity is betting on becoming a leader in the metaverse by creating 3D content in VR and AR. By empowering creators with its tools, it is strategically positioned to capture most of the market share.”
Manturov is not dismissing Meta as a good long-term metaverse investment, and noted it has already started snapping up some of the most promising metaverse software companies. With its vast financial resources, Meta could succeed just by buying up a huge portfolio of third party firms.
“Meta has offered to buy the VR fitness app Supernatural, thereby acquiring an even larger share of the VR market when combined with the strong sales of its Quest 2 headset. Meta also opened its Horizon Worlds virtual space from beta, allowing game developers to gain access to new tools for creators. Investors should treat its opening as a positive catalyst.”
Despite being generally positive on the metaverse as an investing trend, Manturov is very skeptical of one particular element within the theme.
“Real estate in the metaverse is a completely niche market, albeit one with a very passionate fan base,” he said. “However, if the metaverse platform collapses, your investment fails along with it.”
“Unlike with real property, metaverse property will also disappear completely if the platform fails financially. Therefore, investing in digital real estate is very risky, and you should only invest capital that you are prepared to lose. As it is very speculative at this stage, and there is a good chance of running into a bubble and losing money, it’s best to stay away for now.”