Ever since Facebook changed its name to Meta Platforms (META), there's been lots of talk about the metaverse. Many experts and enthusiasts tout the metaverse as the next major platform after the internet and the cloud.
What opportunities could the Metaverse provide?
The space could provide significant opportunities for companies who execute their plans successfully, although many investors struggle to understand what the metaverse is or could be. Without going into a lot of detail, the metaverse is essentially an immersive, 3D virtual space where people can interact with the virtual environment and with other people who are also connected.
The video game space may be the easiest place to see the potential opportunities that the metaverse could offer. In fact, once many investors understand this aspect of it, they may begin to understand the other potential opportunities in the metaverse, like advertising and even virtual construction.
One firm estimates that the global metaverse in entertainment market will be worth $221.7 billion by 2031 after an impressive 32.3% compound annual growth rate. In fact, that firm estimated that the metaverse in entertainment market was already worth $13.8 billion in 2021. Here are four gaming stocks for the metaverse that might be worth watching.
Allied Gaming & Entertainment
Allied Gaming (AGAE) has a market capitalization of $41.1 million and generated $6.4 million in revenue last year, recording net losses of $10.8 million. It describes itself as "a global experiential entertainment company" that provides "unique experiences" to gamers.
Allied Esports is an award-winning esports firm with global properties, live events and production services for creators, competition and content. Among Allied Gaming's properties are the HyperX Esports Arena in Las Vegas and its Allied Esports Trucks, which are the first 18-wheel mobile gaming arenas. The company also runs the first esports venue affiliate program in the world, providing competitive community and professional esports and gaming events. AE Studies, Allied's content development and production segment, has created both original and white-label productions.
Enthusiast Gaming Holdings
Enthusiast Gaming (EGLX) has a market cap of C$82 million and generated $202.8 million in revenue in 2022 with net losses of $76.8 million. The company states that its mission is "to build the world's largest network of communities for gamers through multi-channel media, original content and events.
According to an investor presentation, Enthusiast Gaming received 41 billion total content views in 2022 and had over 262,000 paid subscribers, representing a 120% year-over-year increase. The company claims that it reaches more gamers than anyone else through its network of sites and YouTube channels.
Enthusiast Gaming builds and monetizes communities around the world's most popular games, including The Sims 4, Diablo, World of Warcraft, League of Legends and more. The company also creates original and custom content, including multi-platform development. Enthusiast Gaming owns several gaming studios, including Arcade Cloud, Wisecrack and The Countdown.
Roblox
Roblox (RBLX) is set apart from all the other companies on this list due to its massive scale and widely known brand, which have boosted its market cap to $24 billion despite its continued losses. In some ways, Roblox is the poster child for the metaverse in video games, although this technology is still in a nascent stage, even for major players like Roblox. The company recorded net losses of almost $1 billion on $2.2 billion in revenue last year.
However, Roblox boasts 66.1 million daily active users, 14.5 billion engagement hours, and 3.2 million creators with 6.4 million immersive experiences spanning a range from gaming to social hangouts, sports, concerts, education, and more. Despite its continued losses, the company's massive scale demonstrates the potential opportunities that could await metaverse companies focused on the video gaming space.
Thus, investors who buy shares of Roblox are investing in growth at any cost and future profits rather than near-term results.
Super League
Finally, Super League Gaming (SLGG) touts itself as "the Rocketship to the metaverse" through its owned and operated game worlds. The company has a market cap of $22.7 million and earned $19.7 million in revenue in 2022 with net losses of $85.5 million. Super League Gaming builds and operates game networks, monetization tools and content channels across open-world gaming platforms. The company also offers a metaverse advertising platform.
Super League has worked with many big-name brands on metaverse-related gaming offerings, including Mattel, Paramount, Netflix, Nickelodeon and ESPN. The company specializes in building immersive environments and has a presence in some of the most popular gaming environments. In fact, Super League owns and operates the largest retail Minecraft communities in the market.
The company reports over 120 million unique monthly players, more than 1 billion monthly impressions, 700 creators using its technology, and over 100 branded programs in 2022.
Investing in the video game corner of the Metaverse
It certainly looks like the metaverse is here to stay, but any bets on the space are best placed for the long haul rather than the short term. Even Meta Platforms, which kicked off the metaverse mania among investors, still loses billions of dollars on its metaverse efforts every year.
However, if the explosions in previous revolutionary technologies like the internet and the cloud are anything to go by, the metaverse could create some big winners. We also know video games are a hot space. This estimate suggests the video game software was worth $198.5 billion in 2021 and could grow to $751.4 billion by 2031, representing a compound annual growth rate of 14.4%. Thus, it seems like the intersection between video games and the metaverse could one day be a hugely profitable sector, especially given that major video game brands like Unity Software (U) have been diving in.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Ari Zoldan
Ari Zoldan is the CEO of New York-based Quantum Media Group, LLC. The company provides investor relations, public relations and equity research services to publicly traded companies. As an on-air media personality, Ari can be seen regularly on major media outlets and is frequently quoted in mainstream news outlets covering business, innovation and emerging trends.
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