The metaverse has emerged as one of the most exciting new frontiers in technology. According to Strategic Market Research, the market size for the metaverse may grow to $1.6 trillion by 2030, representing a compound annual growth rate (CAGR) of 38%.
Many assets in various tech subsets will become metaverse stocks as a result of that level of development. However, two firms are predicted to deliver outsized returns from the metaverse – Unity Software (U -0.24%) and Zoom Video Communications (ZM -3.42%). Let’s have a look at these two huge metaverse companies with the potential for long-term growth.
1. Unity Software
Because it specializes in offering many of the solutions required for growth in the metaverse, Unity is expected to benefit. Its software, which was initially created for top-level video games, aids developers in creating 2D and 3D representations of spaces. It is a market leader among video game designers that know how to create metaverse-style settings.
The appeal of Unity extends far beyond gaming. The architecture, film, robotics, construction, and automobile industries all benefit from Unity’s tools. In January, Hyundai Motor unveiled a collaboration with Unity to create a “digital twin” of an existing auto plant that may be used to enhance manufacturing processes.
In the first three months of 2022, Unity reported a record revenue of $320 million. While this represents a 36% increase year over year, it indicates some slowing from the 44% growth in last year’s quarter. Furthermore, both cost of operating expenses and revenue grew at a greater rate as a result of stock-based compensation costs and amortization of intangibles, which were not factored in. Non-GAAP net losses came in at $25 million compared to $27 million in the same period last year.
Furthermore, the firm anticipates revenue of $1.35 billion to $1.425 billion in all of 2022. This is a 25% increase at the midpoint, which implies that the metaverse stock will continue to decline. Unity’s stock price has tumbled over 80% from its 52-week high in November as investors have not reacted favorably to this news.
While the business fundamentals look strong, investors should also keep in mind that this has pushed Unity’s price-to-sales (P/S) ratio to 10, which is near an all-time low. Given the company’s bright future for its emerging metaverse growth driver, Unity’s struggles seem to be temporary.
2. Zoom Video Communications
Zoom, on the other hand, has a very unlikely metaverse play. As a tightly controlled population turned to Zoom for business meetings and personal conversations, this stock became a pandemic favorite.
Many occupations have moved out of the office permanently, and when people who live far apart need to interact, they’re turning to Zoom for assistance.
“Zoom’s virtual reality-based experience lets two people across the world appear to be in the same room by creating a virtual reality. The firm has also incorporated a whiteboard feature that allows all meeting participants to see the same visuals,” says Datanyze. “Such progress should help Zoom in retaining its 75 percent market share in video conferencing,” according to Datanyze.
Despite the fact that revenue has slowed down since pandemic highs, revenue in its first fiscal quarter of 2023 (ended April 30) increased 12% year over year to almost $1.1 billion. Since it spent heavily on itself, R&D, and sales and marketing costs went up by 34%, resulting in a 50% decrease in net income to $114 million during the time period.
Growth, on the other hand, might not improve right away. However, one intriguing prediction came from Cathie Wood, who currently owns Zoom in the ARK Innovation ETF at number one. Wood predicted that by 2026, Zoom will trade between $700 and $2,000 per share. Some analysts believe Wood is probably incorrect about Zoom’s growth rates given its 80% drop to around $110 per share.
However, with a P/S ratio of just eight, the stock price is almost certainly reflecting the business’s challenges. Over time, as a metaverse-based online meeting ecosystem develops, Zoom Inc.’s stock will most likely rise significantly.