It was once just a niche concept adored by tech nerds (including yours truly); it is now a global craze: The metaverse. First coined in 1992 by science fiction writer Neal Stephenson, "metaverse" was used to describe a parallel world in which humans interacted with each other in a three-dimensional virtual space, or as avatars.
Fast-forward thirty years later, the term metaverse is now mainstream and is believed to become with a massive growth opportunity. In a note to investors, last week, Mark Shmulik, internet analyst at Bernstein, said the metaverse is likely to be "really big," with a combined annual run-rate of most markets at $2 trillion and growing. It's likely for this reason Mark Zuckerberg earlier this year said he wanted to transition the company away from its singular focus on social networks towards a more immersive idea aimed for the metaverse.
Facebook’s (FB) recent rebranding as Meta Platforms is the first major step. While the social media giant, or should I say Meta Platforms, has taken a giant leap toward integrating virtual reality with everyday life with the Oculus VR headset, it is not alone. Aside from Meta Platforms, companies such as Microsoft (MSFT) are projected to be major players in the metaverse. With its HoloLens headset, a competitor to Oculus, Microsoft is believed to be working on virtual productivity tools that enable new ways to collaborate online.
Apple (AAPL) which is rumored to be launching AR glasses of its own in 2022, is also vying for the metaverse space. Shmulik noted Apple’s years of investment in consumer hardware as giving the iPhone maker a strong advantage. Citing the love consumers have the Apple brand, and the company’s expertise in adjacent areas as "likely ... to pay off in some way in the metaverse.” Apple hasn’t confirmed it is working on an AR glasses, but it could boost the company's value by $20 per share, according Wedbush Securities analyst Dan Ives.
Ives note that Apple has a strong footing into "this massive market opportunity and tapping the broader metaverse ecosystem.” While analysts have noted Apple, Microsoft and Meta’s VR and AR capabilities, it’s also becoming clear that those who win the metaverse won’t always have to be consumer hardware companies. Ives noted that a company like Matterport (MTTR), which creates 3D spaces (such as mapping a house that is for sale for realtors to promote), have risen to the top of the his firm’s metaverse winners list. Last month Ives raised Matterport’s price target to $38, saying it is in the "early innings of a unique growth story.”
While it's still early to determine the winners of the metaverse and market opportunity, we can see the level of interest that already exists with the popularity of virtual social spaces like Roblox and Fortnite that attract millions of people per day. What’s more, the rise of non-fungible tokens (NFTs) and cryptocurrencies that can enable transaction in the metaverse can enable persistent virtual experiences in a secure way. Consider that even Nike (NKE), analysts say, is preparing to sell virtual sneakers. Why not, say, virtual homes or virtual vacations?
Analysts at Jefferies are calling it a "new platform for the digital age," that the metaverse will be the "biggest disruption humans have ever experienced.” As such, investors who are looking to capitalize on the metaverse has the early spawning of internet to compare it to. Jefferies advises that investors reflect on how the internet was built: Who were the hardware winners that created the Internet, and who were the software winners that designed and hosted it? Bet on both.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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