Which metaverse stocks should you watch?
Following a bearish January, are metaverse stocks set to recover?
Investors who are feeling a strange sense of déjà vu over January’s market sell-off are not alone. With tech stocks shattered, and CNN reporting Warren Buffett as ‘having the last laugh’, a new era of tightening monetary policy has seen investors reassess outlandish growth prospects.
But this isn’t anything new. March 2020 saw the FTSE 100 lose a third of its value in a month. 2008 was the year of the credit crunch and the collapse of the US sub-prime bubble. And between March 2000 and October 2002, the dot-com bubble burst saw the NASDAQ Composite fall 78%.
Moreover, the best metaverse stocks can be more volatile than most; their valuations are usually based on future aspirations built on foundations of cheap debt. But there are signs of an overcorrection, with the NASDAQ Composite up more than 400 points since its low last week. And as Buffett says, it can pay to be ‘greedy when others are fearful.’
What are the best metaverse stocks?
With over a billion users worldwide, DocuSign is an e-signature pioneer. Its share price hit $310 last September, representing a ten-fold increase over its Initial Public Offering price. But at $117 right now, it’s down 60% in the past six months. The metaverse stock fell hard after Q3 results, as CEO Dan Springer told investors that customers would ‘return to more normalised buying patterns’ when workers begin the return to offices.
And it predicts Q4 revenue will be around $560 million, below previous analyst expectations. On the plus side, revenue increased 42% year-over-year in Q3 to $545.5 million. And while companies from Morgan Stanley to Alphabet are pushing for a full return to in-person work, research from Slack shows one in six workers will quit if forced back to the office full-time. And with the bar to beat expectations now so low, decent Q4 results could spark a recovery.
Then there’s metaverse darling Roblox, which shot up to $135 in November after its March IPO. But the online gaming company is down 44% over the past month to $58 a share, as broader concerns of interest rate rises begin to bite. However, the company has an edge over its competitors, as its user-generated content can respond rapidly to changing trends. And CEO Craig Donato believes ‘there’s an incredible amount of innovation’ needed to build the metaverse. Moreover, in Q3 results, revenue increased 103% year-over-year to $509.3 million, with average daily users up 31% to 47.3 million people. With collaborators from Nike to Paris Hilton, it’s a metaverse stock to watch if the recovery gets underway.
Semiconductor shortages
Advanced Micro Devices is down 27% since the start of the year to $105. But with Q4 results due tomorrow, it has plenty of reasons to be optimistic. The company has been given the green light by China to buy fellow chip manufacturer Xilinx for $35 billion, which will lift its total addressable market from $79 billion to $110 billion. Meanwhile, competitor Intel’s ambitions to acquire ARM are all but over.
And according to FactSet, the average analyst estimate for revenue tomorrow is $4.47 billion, up from $3.24 billion a year ago, and above the top end of previously issued guidance. Bernstein analyst Stacy Ragson has a $130 target on the metaverse stock, believing ‘AMD is capitalizing well as Intel enters transition, and seems better positioned than their larger counterpart.’ And KeyBanc sees ‘AMD benefiting from strong demand in cloud data center,’ which will see it nearly double its server market share of 11%-12% in 2021 to 20% by the end of 2022.
Meanwhile, fellow metaverse stock Nvidia is down 22% to $228 this month, as the market sell-off continues. But it’s still up 700% over the past five years. And this best metaverse stock just announced that it will be Meta Platform’s (Facebook’s) primary partner as it begins to build the fastest supercomputer in the world. According to Meta CEO Mark Zuckerberg, the AI Research Supercluster will facilitate ‘experiences we’re building for the metaverse (that) require enormous compute power.’ And in Q3 results, Nvidia posted $7.1 billion in revenue, up 50% year-over-year, driven by its best-ever gaming and data centre results.
Moreover, this month’s survey from the US Commerce Department found ‘there is a significant, persistent mismatch in supply and demand for chips, and respondents did not see the problem going away in the next six months.’
A reversal of fortunes for these best metaverse stocks may become a February reality.