Metaverse stocks have fallen considerably in the last few months despite long-term opportunities
- Whether high-quality or not, metaverse stocks have been sold across the board. That’s despite plenty of long-term opportunity.
- Nvidia (NVDA) has specific tools aimed at the metaverse, yet also powers all the infrastructure that makes it a reality.
- Meta Platforms (FB) has gone so far as to change its corporate name from Facebook to Meta Platforms in a display of its future plans for social interaction.
- Between Microsoft’s (MSFT) virtual office tools and platforms and its pending acquisition of Activision Blizzard (ATVI), it has a multi-pronged approach to the metaverse.
Source: allme3d / shutterstock.com
The metaverse rhetoric seems to have lost some steam. Thus, investors are not talking about metaverse stocks as much as there were six months ago. Even though there were some cracks in the foundation in the fourth quarter — some growth stocks were in a bear market — investors were still optimistic. The metaverse was discussed frequently, while many high-quality growth stocks were at or near all-time highs.
That’s no longer the case.
Many of our favorite stocks have been buried, while a large list of growth stocks have fallen by 75% to 80% or more. Some of the names on this list have even fallen by 50% or more. That’s not indicative of a healthy market environment.
There is one silver lining to all of this mess, though, which is that these deep declines create opportunity for investors. However, this is not necessarily an opportunity for next week or next month. Heck, perhaps not even the next quarter or two. However, buying some of these names could create a long-term opportunity to secure a great cost basis in several excellent businesses.
That’s particularly true when we’re looking at metaverse stocks. Here are my top three picks for metaverse stocks to buy now:
| NVDA | Nvidia Corporation | $161.04 |
| FB | Meta Platforms, Inc. | $178.56 |
| MSFT | Microsoft Corporation | $255.70 |
Metaverse Stocks to Buy: Nvidia (NVDA)
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Nvidia (NASDAQ:NVDA) is a fascinating prospect for metaverse stocks. First, NVDA stock is down 40.7% from its all-time high. That’s a stunning fall from grace for what is ultimately an incredibly high-quality holding.
That’s particularly true with analysts’ expecting roughly 25% to 30% revenue and earnings growth this year. Further, despite the decline in its stock price, revenue estimates for this year and next year continue to inch higher.
Call it what you want — a rerating or something else — but this selloff is the kind of irrationality we see in bear markets. It’s a sell-everything reaction, whether it’s fair or not. Now Nvidia trades at a more reasonable 29 times this year’s earnings estimate and continues to cater to long-term secular growth themes.
One of those themes is the metaverse and Nvidia’s Omniverse platform is built just for it. According to the company, “Omniverse is in use across a growing number of industries for projects such as design collaboration and creating ‘digital twins,’ simulations of real-world buildings and factories.”
Not to mention Nvidia’s other businesses — datacenters, cloud-computing, gaming, graphics, etc. — all help power or otherwise take the metaverse from theory to reality.
Meta Platforms (FB)
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Meta Platforms (NASDAQ:FB) is a really interesting stock after its 45.45% year-to-date fall from grace. Even after Meta’s modest bounce, shares are still down 48% from the all-time high. Despite some of the negatives associated with Meta and social media in general, this company has a lot of positives.
Meta is the premiere social media and communications platform of the world. Not only does it operate Instagram and Facebook, but also WhatsApp. In 2021, the company operated four of the top 10 most popular mobile apps. There’s clear value in that type of monopoly.
Further, the company also owns the formidable virtual reality headset maker Oculus.
With the recent decline, Meta now trades at just 16.5 times this year’s earnings — less than the S&P 500’s valuation. Admittedly, earnings are forecast to fall 13% this year as the company sorts through some growth and cost issues. However, at what valuation are these shortcomings accounted for? That’s especially true with nearly 20% forecasted earnings growth in 2023.
Metaverse Stocks to Buy: Microsoft (MSFT)
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Last but not least, we have the behemoth that is Microsoft (NASDAQ:MSFT). The company still sports a market capitalization of nearly $2 trillion. Of the metaverse stocks on this list, this one has held up the best. Year-to-date, Microsoft stock fell only 23.27%. That’s far from great, but it’s much better than the nearly-50% haircuts we saw in the other stocks.
So, what makes Microsoft such a good metaverse play?
Microsoft runs Teams, a communications platform for businesses. As the world continues to shift to remote and hybrid work environments, Teams would be a great place to have a metaverse solution — a virtual meeting place for groups of people.
However, we can’t forget about Microsoft’s gaming presence, as well. It owns Xbox, the incredibly popular Minecraft game, and is now buying Activision Blizzard (NASDAQ:ATVI).
In short, Microsoft is building out a multi-pronged metaverse strategy. While many companies are doing great work in this space, a behemoth like Microsoft could become the premiere player. That’s especially true given the size of its balance sheet and the selloff in many growth stocks over the last six months.
On the date of publication, Bret Kenwell held a long position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
