Investing in the metaverse is a great way to benefit from one of the most fascinating technological revolutions in recent memory. Some researchers and industry insiders believe it might become a multi-trillion-dollar yearly market.
Even if the developing product and service sector reaches near that level, the stock market is guaranteed to see some huge winners. Read on to see why experts believe Himax Technologies (NASDAQ: HIMX), Unity Software (NYSE: U), and Roblox (NYSE: RBLX) are worth considering for anyone interested in buying metaverse stocks this year.
It’s been a difficult start to the year 2022 for metaverse forerunner Roblox. The year-to-date figures indicate a drop of 27%, to go with a 51% decline from the all-time high. In the aftermath of the pandemic, the corporation benefited significantly. Students started to stay at home and remote learning kicked in.
Roblox’s YoY daily active users increased by 18.5 million in the first quarter of 2021. With that, the total came to 42.1 million. Since then, there has been a decrease in growth. However, by the conclusion of the third quarter of 2021, Roblox still managed to attract an additional 5.2 million users.
It is worth keeping in mind that the majority of activities on Roblox, as well as membership, are free. Roblox’s revenue generation is reliant on the in-game currency namely Robux, that allows users to purchase premium products and experiences. In addition to an increase in customers, sales have risen at a rapid rate since the outbreak of the pandemic.
Even though Roblox isn’t making profits yet, the cash flow is quite solid. For the last five quarters, Roblox has recorded a free cash flow of more than $100 million.
Metaverse futures are the subject of much discussion. That said, the technology may still take several years to take full effect. In the process, VR-focused brands could fail to generate high returns.
Unity has made it to our list of metaverse stocks to buy in 2022 mainly because of its potential to be a great success in a wide range of industries, including product design, engineering, and architecture, as well as entertainment content like VFX and gaming. The development of design tools, games, and videos is taking place using the firm’s software and services.
And Unity’s platform is getting popular among creators. The number of customers paying $100,000 or more per year has climbed by 32% in the last year, leading to a revenue increase of 43%. Since consumers are spending more money, the dollar-based net expansion rate was 142 percent. Not to mention the recent purchase of Weta Digital, which will allow Unity to further entrench itself in the world of high-end entertainment content.
Despite the recent sell-off, Unity stock still trades at a price-to-sales ratio of 30 times. In spite of this, experts are enamored with the company and its possibilities for further rapid expansion and rising profit margins. It is believed that the prospects of market-beating returns are much greater now that the stock market is down 48% from its peak.
3. Himax Technologies
While metaverse stocks seem most likely to generate profits through software and services, investors can benefit greatly from certain hardware component providers too. Himax Technologies seems to be in a strong position to succeed. With their display-driver circuits, which control pixel colors on screens, this business is well-positioned to help bring metaverse visions to life.
A strong revenue and earnings growth saw this stock rise last year. But it has since fallen on concerns about chip production restrictions and the growing market distrust of tech firms. The stock is now down 38% from its 52-week high after recent market volatility. However, it is vital to keep in mind that this industry is very cyclical and that the company’s future P/E and P/S ratios are reduced to barely 4 and 1.1, respectively, due to the recent sell-off.
When it comes to cyclical equities, attractive multiples like P/E and P/S may really be a warning sign. They might imply that the firm is nearing the peak of an upward trend and that performance could decline in the near future. For Himax investors, there are grounds to believe that the company’s stock still has a lot of room for improvement.
Himax was a pioneer in AR and VR chip development. But it has yet to reap the rewards of metaverse-related gear. Last year, the company’s revenues and profitability grew mostly due to its displays for automobiles and smartphones. The automotive-display category is still in its infancy. The mobile sector also appears in the early stages of a big upgrade shift linked to 5G and augmented reality.
Himax looks to be entering a new phase of its economic cycle. It is characterized by increased demand for its core products and the emergence of the metaverse.
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