The pandemic-led social transformation has established digitization as the new normal. The outbreak of coronavirus quickly changed the lifestyle and lookout of people. People who were not entirely used to digital platforms for doing office work (working from home), ordering food and other daily needs, transferring money and making payments are now fully tuned to these activities.
In 2020, UNCTAD reported "The global crisis brought on by the coronavirus pandemic has pushed us further into a digital world, and changes in behavior are likely to have lasting effects when the economy starts to pick up. The future will be much more digital than the past. This is going to provide a major impetus for the development of artificial intelligence, and cyberspace activities.”
Metaverse – The Latest Advent
The latest advent of the digitization space is the metaverse. In a nutshell, metaverse means a virtual world that is interactive and collaborative. The digital space is powered by the use of virtual and augmented reality.
According to a Bloomberg estimate, the market opportunity for the metaverse is expected to reach $800 billion by 2024 from $500 billion in 2020. The primary market for online game makers and gaming hardware may top $400 billion in 2024 while the remaining business will come from live entertainment and social media. Gaming, AR and VR create a $413 billion primary market for the metaverse.
According to Verified Market Research, citing a PRNewswire article, the metaverse market size, in reality, is estimated to reach $824.53 billion by 2030 from $27.21 billion in 2020. The market is expected to witness a CAGR of 39.1% from 2022 to 2030.
Stocks to Watch
We have narrowed our search to five stocks that have the potential to become major players in the metaverse space.
NVIDIA Corp. ( NVDA Quick Quote NVDA - Free Report) is benefiting from strong growth in GeForce desktop and notebook graphics processing units (GPU), which is boosting gaming revenues. NVDA’s state-of-the-art GPUs are likely to play an important role in metaverse development. NVIDIA’s acquisition of Mellanox is a key catalyst in this regard.
The NVIDIA Omniverse Enterprise platform is an end-to-end collaboration and simulation platform that fundamentally transforms complex design workflows in 3D space. This virtual content creation platform enables designers, creators and engineers to easily share their material in a digital space.
Zacks Rank #3 (Hold) NVDA has an estimated revenue growth rate of 2% for the current year (ending January 2023) and 14.4% for next year. The Zacks Consensus Estimate for the current year and next year earnings has improved 1.2% and 0.4%, respectively, in the past 30 days.
Alphabet Inc. ( GOOGL Quick Quote GOOGL - Free Report) has been growing rapidly in the booming cloud-computing market. GOOGL’s cloud offerings include Google Cloud Platform and Google Workspace, which are gaining momentum in the booming cloud computing market.
Further, Alphabet’s growing investments in infrastructure, security, data management, analytics and AI remain major developments in the metaverse space. GOOGL’s growing efforts toward strengthening its presence in the booming wearable space remain noteworthy.
Zacks Rank #3 Alphabet has an estimated revenue growth rate of 11.6% for the current year and 10% for the next year. The Zacks Consensus Estimate for the current year and next year’s earnings have improved 0.2% and 0.2%, respectively in the past 30 days.
Apple Inc. ( AAPL Quick Quote AAPL - Free Report) is encouraging developers to use artificial intelligence and machine learning in their apps. AAPL’s focus on autonomous vehicles and augmented reality/virtual reality technologies presents a growth opportunity for the long haul.
To ramp up its efforts, Apple has acquired several smaller firms with expertise in AR hardware, 3D gaming and VR software. These include SensoMotoric, Flyby Media, Emotient, TupleJump, Turi, Metaio, PrimeSense and Lattice Data Inc. In addition, AAPL’s ARKit is helping third-party developers to work on creating AR experiences for its iOS platform.
Zacks Rank #3 Apple has an estimated revenue and earnings per share growth rate of 4.5% and 6.2%, respectively, for the current year (ending September 2023). AAPL came up with earnings beat in each of the last four reported quarters.
Snap Inc. ( SNAP Quick Quote SNAP - Free Report) is continuing to focus on developing AR hardware through its Spectacle smart glasses. The adoption of the company’s AR lenses has been strong, particularly post the launch of Lens Studio 2. At the end of 2020, Snap launched its first-ever 5G-enabled Landmarker Lens (a new tool for overlaying AR on the world) in partnership with Verizon. The Lens uses SNAP’s augmented reality technology and Verizon’s 5G Ultra-Wideband capabilities.
The solid adoption of products like Scan and AR Bar is driving the usage of AR-based lenses, providing significant growth opportunities to SNAP. Moreover, the launch of Local Lenses, which enables shared and persistent AR experiences in much larger areas around the world, is expected to aid user engagement.
Snap added Cartoon Lens powered by real-time machine learning to its portfolio. Moreover, the launch of music Lenses in Lens Explorer and Dynamic Lenses, which allow developers to bring real-time information from their app into Snapchat Lenses, is a key catalyst.
SNAP has an estimated revenue growth rate of 13.8% for the current year and 15.7% for next year. The Zacks Consensus Estimate for current-year and next-year earnings has improved 66.7% and 20%, respectively in the past 30 days. Snap carries a Zacks Rank #2 (Buy). You can see
. the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here Autodesk Inc.‘s ( ADSK Quick Quote ADSK - Free Report) business transition from perpetual licenses to cloud-based subscription services is expected to benefit it in the long run. ADSK is well-positioned to capitalize on the rapid adoption of computer-aided designing and manufacturing through its comprehensive product portfolio.
Higher demand for Autodesk’s cloud-based products (BIM 360 cloud platform, Shotgun and Fusion Lifecycle), mobile products (AutoCAD 360) and design suites will drive top-line growth. ADSK is also benefiting from its investment in digital infrastructure, which includes its e-store.
Zacks Rank #3 Autodesk has an estimated revenue and earnings per share growth rate of 14.3% and 30.2%, respectively, for the current year (ending January 2023). The Zacks Consensus Estimate for the current year has improved 1.5% in the past 60 days.
The chart below shows the price performance of the five above-mentioned stocks year to date.
Image Source: Zacks Investment Research