The metaverse is a 3D version of the internet.
Facebook has so much conviction in this new technology that it changed its name to Meta. And it’s investing a whopping $10 billion in its metaverse division.
But with metaverse stocks like Unity, Roblox and Matterport down 76%, 78% and 84%, respectively, from their 2021 highs…
You may be wondering if the metaverse is a scam or if it’s really the technology of the future.
When you watch today’s Market Insights video — the answer will be crystal clear.
You’ll find all the details on this next-gen tech in this week’s video.
(If you’d prefer to read a transcript, click here.)
Welcome to the metaverse.
I’m Steve Fernandez with Market Insights. You’re watching this video, so you’re already one foot into the metaverse, and you may not even realize it.
Metaverse was a huge topic with investors in 2021 — especially the stocks of companies that claim to have exposure to the metaverse. Or they were claiming that, you know, they would have exposure to the metaverse in the future.
Well, their stock prices soared. And if you’ve been paying attention, you’ve seen that has reversed course. And a lot of these stocks are down tremendously from their highs.
So I want to talk about the metaverse.
Is there any legitimacy there? Was it all smoke and mirrors? You know, what is the metaverse? And should we expect to see a resemblance of a metaverse in the coming year?
So before we get started, please subscribe to our channel. We provide pretty good content — at least, I’d like to think so.
And if you like this video, click the like button. It helps us grow our channel to a bigger audience and hopefully help people out.
Are You Familiar With The Metaverse?
So what’s the metaverse? I like to think of it more as a cyberspace, right? Not a fancy word like the metaverse.
Some people kind of thought of the metaverse as a technology, when in reality it’s just a merging of our physical world into a digital world.
And this is being created not just by one technology. This is being created by the development of several technologies.
Think artificial intelligence, the use of machine learning. You have 5G speeds and connectivity that are making things work extremely efficiently. Virtual reality — taking experiences and putting them on a 3D platform.
All of these things working together can shape what I believe to be the metaverse.
And those are all technologies that will continue developing whether there’s a “metaverse” or not.
What Stocks Are Part Of The Metaverse?
Before we get further into that idea, let’s take a look at these stocks.
In this chart, these are pure-play companies that I identified that you can consider “metaverse” stocks, if you will.
Matterport develops property software, where it allows you to take tours of buildings in a 3D fashion.
Unity Software allows game developers to create games on its platform and scale that across different gaming platforms and, you know, mobile devices, etc. And some of that is virtual reality games.
Roblox is a social gaming platform catering to preteens. You know, 7-, 8-, 9-, 10-year-olds. That demographic. And game developers can also create games on this platform, and the users can collaborate with each other and play games.
There’s also Vuzix, which develops virtual reality technology. Some of it is actually being used in an industrial setting, like the medical setting. So an interesting one there as well.
And Roundhill Ball Metaverse is just an ETF that holds companies that are somehow related to the “metaverse.”
I’m not suggesting you buy any of these companies. These are just pure-play stocks that I identified, you know, that can give you exposure to the metaverse idea.
So the narrative behind the metaverse has changed a lot because the stock prices have gone down.
We saw it on the news and financial media every day about how the metaverse was the next big thing, it was the next internet, etc.
But price drives narrative. And because these stocks have withered away, we don’t really hear about it as much.
That has some people thinking it’s not a legitimate thing, right? But rather than look at prices on these stocks, I like to look at what companies are doing.
Where Is The Metaverse Headed?
Where’s the money going? What is management saying about their future plans?
And in this case, I found a pretty clear trend.
Although the stock prices have gone down, the metaverse mentions by company executives has been pretty high. And that’s continued even with the declining share price.
So you can see in the fourth quarter of 2021, the first quarter of 2022 and the second quarter of 2022 there were a relatively large amount of metaverse mentions by company executives.
And this was in prepared remarks or answers to analyst questions, and in earnings calls and conference calls.
I got that data from Bloomberg. And you can see that the trend is still strong, even though it’s pulled back a little bit in part to that narrative drying up, which I mentioned earlier.
Now, what are companies doing to build a metaverse? Where are they putting their money?
Well, let’s start from the top.
Microsoft — and you can consider this an acquisition, but I consider it as a step to build out — is looking to acquire Activision Blizzard. Part of this would be for its metaverse platform.
It would cost Microsoft $69 billion. A huge sum of money. And this is getting some pushback from regulators.
So we don’t know that this is going to go through entirely. But if it does, I expect that Microsoft is going to build up its Game Pass, which is a subscription gaming service.
And we could see that evolve into more of a metaverse 3D platform, if you will. So pretty interesting to see.
So that’s a $69 billion investment by Microsoft. And by the end of 2021, over $10 billion in venture capital went toward metaverse-related companies.
And you even have new VC investment popping up. Now you have venture capital firm Andreessen Horowitz, a pretty renowned VC investor, launching a $600 million metaverse fund.
And there’s a publicly traded company that you could invest in. A little disclosure, I do own a small position in it.
It’s Galaxy Digital Holdings Ltd. (OTC: BRPHF). It set aside a $300 million venture fund dedicated to metaverse companies.
So you can see that there’s a lot of venture funding and even public company funding and investments for metaverse companies and metaverse ideas.
Are You Using Any Virtual Reality?
Everyone knows about Meta Platforms, aka the new version of Facebook.
It created a social virtual reality platform called Horizon. It expects that will help it build out its virtual economy and allow content creators to monetize content in more of a 3D world.
And another aspect of Meta’s business is its Quest headsets.
The Quest 2 virtual reality headsets are selling extremely fast, even outpacing the new generation of Xboxes.
They just reached nearly 15 million units sold here. And again, the fact that they’re selling faster than one of the most popular gaming systems in the world speaks volumes about what consumers think about virtual reality.
Now, Meta’s Reality Labs, which is more or less its metaverse arm, is growing, but it’s losing money.
We’ve seen the market shift to profitable companies in the recent quarters. So, as I expected, Meta Platforms has scaled back a little bit on its resource allocation to Reality Labs because it wants to help out its investors. It wants to win capital from investors.
So it’s more or less a move to bolster its share price. Meta wants to fund its metaverse arm with operating profits. So it sounds like it’s working more to build out or dedicate resources to its main business.
I don’t necessarily want you to think from that that the metaverse is dead. I just see that more or less as a move to strengthen Meta’s share price.
So I don’t think the metaverse is dead. We have billions of dollars in investment flooding into these companies, into these ideas.
But what about you? What do you think about the metaverse? Do you think it’s a gimmick? All smoke and mirrors?
Do you think there’s some legitimacy there? Are you yourself using virtual reality technology?
And would you agree or disagree with my definition of the metaverse, more or less? That it’s translating our physical experiences to a virtual setting?
Leave some comments below, and we’ll address them in a future video. Thanks for watching.
Regards,
Research Analyst, Strategic Fortunes
Morning Movers
From open till noon Eastern time.
Cogent Biosciences Inc. (Nasdaq: COGT) focuses on developing precision therapies for genetically defined diseases. The stock jumped 102% after the company announced positive initial data from its ongoing Phase 2 trials of Bezuclastinib for patients with advanced systemic mastocytosis.
Redbox Entertainment Inc. (Nasdaq: RDBX) operates a network of self-service kiosks where consumers can rent or purchase new-release DVDs and Blu-ray Discs. Thanks to its meme stock status, it is up 37% today despite having no news to report.
Alpha Tau Medical Ltd. (Nasdaq: DRTS) researches and develops diffusing alpha-emitters radiation therapy for the treatment of solid cancers. The stock is up 19% in response to news from earlier in the week that the FDA has approved its application to begin a study for a potential carcinoma treatment.
AeroClean Technologies Inc. (Nasdaq: AERC) provides air purification solutions for hospitals and other health care facilities. It is up 12% after it announced the hiring of a new vice president of strategic sales to lead sales efforts for the company’s recently FDA approved Purgo technology.
New Oriental Education & Technology Group Inc. (NYSE: EDU) provides private educational services under the New Oriental brand in China. It is one of the Chinese stocks that is up 8% today, bucking the trend in the broader Asian markets thanks to higher interest from foreign investors.
Just Eat Takeaway.com N.V. (OTC: JTKWY) connects consumers and restaurants through its food delivery platforms. The stock is up 6% after the company said it is seeing increasing private equity interest in its GrubHub business from big names like Apollo Global.
Rent the Runway Inc. (Nasdaq: RENT) rents designer wear for women through its stores and online retail. It is up 6% after the company reported strong first-quarter results that were driven by the return of travel, events and weddings.
Gold Fields Ltd. (NYSE: GFI) is a gold miner and producer that is up 5% today. The move came after a major investor called on the company to abandon its takeover offer for Yamana Gold and focus on its existing growth options.
Tuatara Capital Acquisition Corp. (Nasdaq: TCAC) is a special purpose acquisition company that is up 5% today. The move came after the company approved its deal to merge with and take cannabis software company Springbig public.
Harmony Gold Mining Company Ltd. (NYSE: HMY) is a gold miner that is up 5% this morning. It is up along with other gold stocks due to the volatility in gold prices as the market tries to navigate the latest inflation data.
