Stocks to buy

The hype surrounding virtual reality, augmented reality, and other immersive technologies have steadily increased over the last few years. Unsurprisingly, investors are eager to capitalize on this trend by investing in companies reimagining how we interact and do business in the lucrative metaverse space. With these positive indicators, savvy investors should provide serious consideration to some of the metaverse growth stocks discussed in the piece.

Growth stocks, particularly in the tech sector, took a massive beating in 2022, shedding 30% of their value. The sell-off was roughly 10% higher than the broader market, a testament to the market’s risk-off sentiment. However, tech stocks are off to an encouraging start since the January opener. One of the top tech exchange-traded funds in the Invesco QQQ ETF is up a healthy 12%, a scenario that bodes well for metaverse growth stocks.

NVDA Nvidia $232.86
U Unity Software $29.61
MSFT Microsoft $249.22
ADSK Autodesk $192.53
RBLX Roblox $36.96
ADBE Adobe $320.54
AMZN Amazon $93.50

Nvidia (NVDA)

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The burgeoning metaverse will require a good deal of hardware to foster its virtual environments, which is where Nvidia’s (NASDAQ:NVDA) robust graphics processing units (GPUs) come into the equation. Nvidia’s cutting-edge GPUs will, in all likelihood, play a crucial role in developing the novel concept, making it one of the picks of the metaverse facilitators.

The firm operates a remarkably consistent business, delivering over 32% sales growth on average over the past five years. The success of its core business enables the tech giant to continue investing in new growth verticals, such as its metaverse content creation platform called the Omniverse.

The platform allows content creators, engineers, and designers to build customized 3D pipelines more efficiently than ever. Moreover, it has already attracted more than 700 businesses worldwide and over 200,000 individuals. If you’re still not bullish on Nvidia’s metaverse prospects, take it from its CEO Jensen Huang, who predicts that the metaverse could be much bigger than the physical world.

Unity Software (U)

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Unity Software (NYSE:U) has revolutionized the video game engine market, offering a comprehensive platform that bundles graphical design, sound, monetization, and other necessary assets. With its easy-to-use interface, it’s no wonder that Unity Software has achieved dominance in its niche, commanding a 60% market share. Moreover, revenue growth has soared over the 20% mark for the past several years, delivering earnings smashers consistently.

In an interview last year, Unity’s CEO, John Riccitiello, talked about the importance of real-time 3D in developing metaverse experiences. AR and VR will undoubtedly play a critical role in creating immersive metaverse experiences, where Unity’s 3D tools come in to mix. The firm’s software suite is tailor-made for the metaverse making it one of the top pick-and-shovels plays in the sector.

Microsoft (MSFT)

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Microsoft (NASDAQ:MSFT) is one of the few companies with a multi-fold plan to dominate the metaverse market.

At the Microsoft Build conference last year, the firm brought together a panel of experts to discuss its metaverse strategy. Its popular business communications platform Teams was a big part of the discussion along with Azure, the HoloLens, and the Azure Percept Studio.

Microsoft recently brought Mesh, a collaborative software for virtual experiences, to the Teams platform. It effectively opened the doors for the workplace metaverse, poised to become a massive sub-niche in the sector. Moreover, the company is also developing the technology needed to maximize the experience with its mixed-reality headset HoloLens.

Furthermore, the metaverse and the cloud are inseparable, which is should Azure’s long-term growth runway. More interestingly, during the conference, its developers talked about the enormous potential of the industrial metaverse. They previewed Azure Percept, a combination of hardware and software services that could play a major role in production management, potentially saving millions in operational costs.

Autodesk (ADSK)

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Autodesk (NASDAQ:ADSK) is a leader in the construction and engineering industry with its popular building information modeling solution called Revit. The platform has changed how architects and engineers build, providing an intuitive 3D design tool that makes it simple to create models and visualize the plans for any project. With the addition of Autodesk’s plugins, users can layer their designs with rich VR and AR renderings.

Its software services’ incredible success and subscription model have helped significantly strengthen Autodesk’s fundamentals. Its gross and EBITDA margins have grown remarkably, 91% and 11.7%, respectively, over the past five years. Additionally, revenue growth numbers have been stellar as well, with the firm’s 5-year top-line growth at an amazing 18.9%. As it continues to add to the immersiveness of its offerings, it will continue to be a force to be reckoned in line with the evolution of the metaverse space.

Roblox (RBLX)

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Roblox (NYSE:RBLX) is a popular metaverse game and a content creation platform for developing online games and virtual experiences. The stock is relatively young, having been listed in March 2021. From its initial listing price, its stock rose over 80% at the end of Dec. 2021. However, a slowdown in its key growth metrics, overarching metaverse narratives, and the weaknesses in the stock market led to a whopping 71% drop in its stock price last year.

However, the good news for the platform is that the concerning post-pandemic narratives regarding its business are starting to reverse. It wrapped up its fourth quarter with bookings totaling $899.4 million, a 17% bump from the same quarter last year. Moreover, average daily active users rose to 58.8 million, a 19% increase from a year-ago period.

Adobe (ADBE)

Source: Shutterstock

Adobe (NASDAQ:ADBE) has been a juggernaut in the tech space, offering one of the most prolific software suites for content creators. Its offerings include some of the most ubiquitous software platforms used by over 23 million users worldwide.

Adobe aims to add more tools and improve existing ones to take advantage of the burgeoning metaverse space. For instance, its popular Substance 3D tools have become industry standards in developing realistic 3D objects. Additionally, it is looking to democratize 3D creation by developing a collaborative platform where users can freely design and share their ideas.

Furthermore, the company is expanding its analytics platform to include robust new tools to track consumer activity with brands, experiences, and objects in the metaverse. Advertising in the metaverse is poised to be a massive market down the road, and Adobe’s proactive approach could pay many dividends down the road.

Amazon (AMZN)

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As the fourth-largest tech company by market capitalization, you’d imagine Amazon (NASDAQ:AMZN) would have plenty to do with the metaverse concept. Though it isn’t a sector pure-play, it stands to benefit immensely from the proliferation of the industry.

After all, Amazon Web Services (AWS) is second to none in cloud-hosting, and the metaverse will undoubtedly run on the cloud. So far, AWS has experienced breathtaking success,  with Analysts forecasting the division to be worth over $3 trillion in the future.

However, Amazon’s role in the metaverse doesn’t stop there. It previewed its gamified metaverse platform called #AmazonMetaWorld last year in India. The goal was to effectively gamify the best of the platform’s universe, previewing what experiential shopping could become down the road.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.