Nasdaq NVDA Nvidia

Say whatever you will about Mark Zuckerberg’s decision to change his company’s name to ‘Meta,’ but the truth is, the metaverse is coming and we can’t stop it. The expansion of the internet, and its increasing integration with virtual reality (VR), augmented reality (AR), and interactive social media and gaming, is gaining momentum. The question is not if it will be fully realized, but when.

But before we get there, we need the inevitable build-out, the physical infrastructure to support the online network. And that will open up scores of opportunities for investors.

Against this backdrop, we’ve used the TipRanks database to call up the latest info on three stocks that are likely to tie-in closely with the metaverse’s early growth. These names have received enough support from the analyst community to earn Strong Buy consensus ratings. Let's take a closer look.

Matterport (MTTR)

One certainty of the metaverse is that it will depend on cameras – high-end digital video will be necessary to convert real-world views into online spaces. Matterport specializes in just that – the company offers a spatial computing platform for high-quality 3D space capture. The company’s software can worth a wide range of cameras, to build a digital side to any space. The connection with the metaverse, a proposed ‘virtual world’ is clear.

Translating the real world to the digital realm is big business, and Matterport has benefitted greatly from it. The company has over 6.2 million digital spaces under its management, based in some 170 countries. Per year, the company brings in approximately $111 million in top-line revenue.

A look at the 3Q21 numbers will give us an idea of just how fast Matterport has been growing. The quarterly revenue of $27.7 million was up 10% year-over-year, driven by a 36% year-over-year gain in subscription revenue, to $15.7 million. That subscription revenue, in turn, was driven by a 116% year-over-year gain in total subscribers, which reached 439,000. Annual recurring revenue, a key metric of future income, was reported at $62.7 million.

Matterport took advantage of its own success and 2021’s generally rising stock environment to go public in the summer via a SPAC transaction. The combination, with Gores Holdings VI, was completed in July, and the MTTR ticker started trading on the NASDAQ on July 23. The transaction brought Matterport $640 million in gross proceeds, and since then the shares have gained 28%. The company has a current market cap of $4.42 billion.

5-star analyst Daniel Ives, covering the tech sector for Wedbush, is bullish on Matterport – especially given that he sees a total addressable market exceeding $240 billion.

“We continue to believe Matterport is in the early innings of a massive growth story playing out over the coming years. Based on our conversations with investors over the past few months we believe this tech story remains ‘under the radar’ among growth investors and we highlight MTTR as one of our favorite ideas [for] 2022," Ives opined.

"Based on our recent checks and customer conversations we have increased confidence in the Matterport growth story... as the company's free to paid conversion model and further penetration of the real estate vertical remains near-term keys to a stepped-up growth story looking ahead," the analyst added.

Given all of the above, Ives has high hopes. Along with an Outperform (i.e. Buy) rating, he gives the stock a $38 price target. This target puts the upside potential at ~109%. (To watch Ives’ track record, click here)

Ives may be right that Matterport has slipped 'under the radar.' The stock only has 3 analyst reviews on record. They all agree, however, that it’s a Buy proposition, making the Strong Buy consensus rating unanimous. Shares are trading for $20.64, and their $32.33 average price target suggests a one-year upside of 56%. (See MTTR stock analysis on TipRanks)

Nvidia Corporation (NVDA)

The next stock on today’s list is Nvidia, a well-known name in the semiconductor chip industry. The metaverse won’t be possible without computer power, and Nvidia has built a reputation as a leader in memory chips and graphics processors, both for professional markets and the gaming industry. The company’s reputation has pushed it to the forefront of its industry, and Nvidia was the eighth largest among all semiconductor companies, by sales, in 2020.

A look at the numbers tells the story. Nvidia saw $16.68 billion in total sales in 2020, the last full year for which data are available, with $11.68 billion of that in the first three quarters. In the first three quarters of 2021, the company’s sales totaled $19.27 billion. It’s an impressive performance, powered by six quarters in a row of sequential revenue gains. The company’s earnings show a similar pattern. EPS came in at $1.17 in Q3, up 13% sequentially and 60% year-over-year.

For metaverse-minded digital world builders, Nvidia has the ‘Omniverse,’ an open-source digital world-building tool built on Pixar's open Universal Scene Description (USD) technology. The similarity in the names may or may not be coincidental – what is certain is that Nvidia’s Omniverse aims to monetize the creation of digital realms, and bring that revenue to the company. It’s one more step on the way to the creation of a full metaverse, and one more example of how the big digital companies are planning to cash in.

Wells Fargo analyst Aaron Rakers, who is rated 5-stars by TipRanks, sees the Omniverse as the key story going forward for Nvidia.

“We estimate that the Metaverse could equate to a $10B incremental market opportunity for NVIDIA over the next 5 years. NVIDIA has outlined a TAM of ~20 million designers and engineers that could benefit from Omniverse adoption today,” Rakers noted.

Turning to the company’s own numbers on Omniverse use, Rakers notes that Nvidia is seeing good signs of early adoption: “NVDA now has >700 enterprise customers evaluating Omniverse vs. previously reporting +500 enterprises; reit. recent disclosure of +70,000 downloads since Dec '20 launch. As we think about NVDA's progression of a recurring subscription rev. stream, we continue to believe deferred rev. / RPO growth should be considered the leading indicator.”

In line with these comments, Rakers rates NVDA shares as Overweight (i.e. Buy), with a $370 price target to suggest a 26% one-year upside. (To watch Rakers’ track record, click here)

Overall, Wall Street is in broad agreement that Nvidia is a stock to buy. The shares have 26 recent reviews, including 24 Buys and just 2 Holds, supporting the Strong Buy analyst consensus rating. NVDA’s average price target of $360.17 implies an upside of ~23% in the next 12 months, from the current share price of $292.9. (See NVDA stock analysis on TipRanks)

Unity Software (U)

Some companies will find themselves well-prepared to meet the technical demands of the metaverse. Unity Software is one of these. Unity is known for its game-construction applications; the company makes software platforms that enable RPG creators to build gaming spaces in real time, and in 3D. And not just online game builders – Unity’s software and software platforms have applications in industrial design, architecture, films. The systems are compatible with AR and VR devices, both as user and designer interfaces. In fact, it sounds a lot like the metaverse already.

The metaverse’s success will be based on a combination of user experience and creators’ ability to monetize the applications. These are the exact areas where Unity works already, and the company has ridden them to early successes of its own.

The most recent quarterly report, for 3Q21, showed $286.3 million at the top line, up 43% year-over-year. Earnings came in at a 6-cent per share loss, deeper than the 2-cent loss of the previous quarter but improved from the 9-cent loss recorded in 3Q20. The results were widely interpreted as showing clear momentum for the company going forward.

In one last burst of positive news for Unity, the company announced in December the completion of its acquisition deal with Weta Digital. The merger brings Weta’s tools, pipeline, tech, and talent into Unity’s fold, giving a boost to Unity’s already-strong digital creation platforms. The merger is a cash-and-stock deal, worth a total of $1.65 billion.

In a detailed note for D.A. Davidson, analyst Franco Granda sees the Weta merger as the leading point in Unity’s story, writing, “Weta adds leading visual effects technology and talent to greatly deepen Unity Engine’s capabilities, adding $10B to the TAM in the process. Unity also continues to seed the market with interesting new offerings of their own built on impressive technologies, improving the growth profile and solidifying its market leading position. It is all about building the best RT3D platform. U continues to be one of our favorite names as an established leader in gaming and key enabler to the metaverse.”

These comments support Granda’s Buy rating on Unity shares, while the analyst’s $190 price target indicates room for ~46% upside in the 12 months ahead. (To watch Granda’s track record, click here)

Once again, we’re looking at a stock with a Strong Buy consensus rating from the Street. U shares have 10 reviews, breaking down 8 to 2 in favor of the Buys over the Holds. The stock is trading for $129.73 and its average target of $180.25 suggests it has room to run 39% this year. (See Unity’s stock analysis on TipRanks)

To find good ideas for metaverse stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

What happened After starting off the new year with a healthy 4.4% share price gain Monday, Advanced Micro Devices (NASDAQ: AMD) took a turn for the worse Tuesday. As of 1:33 p.m. ET, shares of the semiconductor giant were down 5.7% -- more than deleting all of Monday's gains.

Intel Corp on Tuesday said that it has started shipping new graphics chips aimed at PC gamers, a growing segment that has long eluded the chipmaker and is dominated by larger rival Nvidia Corp.

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What happened After starting off the new year with a healthy 2%-plus gain yesterday, Nvidia (NASDAQ: NVDA) stock took a turn for the worse this morning. As of 11:50 a.m. ET, shares of the semiconductor giant are down 4.5% -- erasing all of yesterday's gains and even a bit more.

The Dow hit a record high on Tuesday, boosted by banks and industrial stocks as worries about the Omicron variant of the coronavirus subsided, while a fall in heavyweight technology stocks dragged the S&P 500 and the Nasdaq indexes lower.

U.S. high performance chip maker Nvidia Corp said Tuesday it has landed more deals with Chinese electric vehicle makers that want to use the company's technology to power software-driven features that could lure customers away from Tesla Inc.

Nvidia Corp on Tuesday said that it would give away software for free to artists and other creators building virtual worlds for the metaverse and that it has made technology deals with several marketplaces where artists sell the three-dimensional content they create.

The beginning of 2022 might feel like a great opportunity to shuffle your portfolio, but it's important you only purchase stocks that you're prepared to hold for the next five years (or longer). While everyone is focused on getting a fresh start in the new year, as investors we s

Shares of graphics-chip kingpin Nvidia (NVDA) enjoyed another unbelievable year in 2021. The company has a front-row seat to many of the hottest technological trends out there. From the continued rise of AI to the future of the metaverse, it's clear that demand for Nvidia's leading graphics-processing products has the means to remain incredibly robust for many years down the road.

Given some of the more abstract trends like the metaverse, longer-term demand for processing power is difficult to fathom. Arguably, the metaverse (virtual worlds) already exist, with experiences and games offered by the Oculus segment of Meta Platforms (FB).

That said, the current state of the metaverse isn't what has so many investors excited. Indeed, the types of virtual worlds made famous by the 2018 film Ready Player One are what investors are looking towards. As ever-improving virtual and augmented worlds become increasingly popular through the decade, Nvidia and other GPU makers are due to have a profound tailwind to their back.

Despite the many promising trends and tailwinds, the potential for rising competition and NVDA stock's hefty valuation multiple has me standing on the sidelines in 2022. I am bearish on the stock. (See Analysts’ Top Stocks on TipRanks)

Nvidia Stands atop the GPU Space, but Can It Add to Its Lead?

Right now, Nvidia is a leader that's poised to take the lion's share of the rewards that'll accompany its massive TAM (Total Addressable Market). The stock is priced such that Nvidia will remain dominant.

Over time, though, there's bound to be a rise in competition, and investors should not discount their potential impact on Nvidia as firms push to pack powerful graphics processing capabilities into a smaller package.

Indeed, energy efficiency and compact design are poised to become increasingly important in an era where GPUs could find themselves embedded in compact wearables.

Sure, graphical power needs to get stronger to power the future metaverse, but energy efficiency needs to be kept in check if the future's mixed-reality devices are to shrink to a size that's small enough to fit in a mere pair of glasses.

Nvidia's Biggest Threat Is a Company We All Know and Love

Many analysts expect Apple (AAPL) to pull the curtain on their mixed-reality headset within the next year and a half. Such anticipation is a major reason why AAPL stock has been surging higher, even in the face of modest weakness in the tech sector.

Looking beyond the much-anticipated headset, Apple could also have a pair of lighter-weight AR glasses ready by 2025, according to Ming-Chi Kuo, the same analyst that shed light on Apple's coming mixed-reality headset.

Undoubtedly, Apple has been working on its own line of SoCs (Systems on a Chip) with its M1 line. Thus far, they've been imposing, not only on the performance front but in terms of energy efficiency. Apple's M1 (Pro and Max) chips are incredible on the latter metric. Apple's own chips are likely to be incorporated into its next-generation mixed-reality devices.

As Apple continues delivering such top-level benchmarks from its M-series chip iterations, one has to think that Apple could stand to eat up a big chunk of the graphics-processing market over the next three years. As Apple's chip capabilities continue raising the bar, it seems incredibly unlikely that the next generation of Apple VR/AR devices will include anything other than an ambitious chip designed by Apple.

The implications for Nvidia are unclear should Apple find itself with the keys to the metaverse. Regardless, Apple, the original innovator, could find itself moving further into Nvidia's turf, as it takes hardware design and creation into its own hands.

If I were an Nvidia shareholder, it's Apple, not AMD (AMD), that could pose as the biggest rival over the long run.

Wall Street's Take

Turning to Wall Street, NVDA stock comes in as a Strong Buy. Out of 26 analyst ratings, there are 24 Buys and two Hold recommendations.

The average Nvidia price target is $360.17, implying 24% upside potential. Analyst price targets range from a low of $285.00 per share to a high of $400.00 per share.

The Bottom Line on Nvidia

Apple's hardware ambitions are worth keeping an eye on, as it looks to move into many of the emerging areas of the tech sector that Nvidia has its sights set on.

Even if Apple powers many of the next-generation experiences in the metaverse, there's still a ton of market share for Nvidia to support its lofty multiple. The applications of top-notch graphical processing are wide enough to have more than one winner. At this juncture, Nvidia's Omniverse platform, in particular, looks like a potential game-changer.

Although Nvidia is a wonderful company that seems destined to reach a $1 trillion valuation, I just don't see last year's momentum carrying over in 2022. There's just too much excitement in the name here, but I would be open to buying the name on a steeper pullback.

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Disclosure: Joey Frenette owned shares of Apple at the time of publication.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates  Read full disclaimer >

Today's video focuses on Advanced Micro Devices (NASDAQ: AMD), a company focused on producing high-performance processors and graphics cards. I discuss its upcoming acquisition and upcoming keynotes. Here are some highlights from the video.

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Apple Inc on Monday inched closer to $3 trillion in market value after hitting a record high on the first day of trading this year. The company's shares rose as much as 2.6% to $182.17 in mid-day trading, a tad lower than the milestone mark of $182.86.

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Nvidia (NVDA) continues to trade near record levels following the stock's extended rally over the past few years. Despite the ongoing concerns, including COVID-19, its steep valuation levels remain. The company keeps benefiting significantly from the growing adoption of cryptos, with demand for its graphics cards staying at sky-high levels due to their contemporary utilization of mining coins.

At the same time, the industry's lasting supply chain issues and shortages have additionally broadened the disproportionally higher demand to supply gap, feeding Nvidia with tremendous pricing power. Try building a PC these days, and upon deciding which graphics card to buy, you will quickly realize how absurd their prices have become.

While Nvidia has been pushing to boost its total production capabilities to meet the underlying, growing demand, its huge pricing leverage alone has led to swift growth in its financials and richer margins by the quarter.

In my view, Nvidia's card will play a critical role in digitalization and AR/VR applications in the coming years. For context, the number of global virtual reality device shipments is expected to grow at a CAGR of 33.85% through 2026. That said, I can't but remain neutral to the stock solely due to its rather steep valuation, which reduces investors' margin of safety at its current levels. (See Analysts’ Top Stocks on TipRanks)

Nvidia's Latest Results

The company's latest results were once again quite strong, with revenues growing 50% year-over-year to $7.1 billion, or 9% from the previous quarter. Powered by evolving economies of scale and its fantastic pricing power as of late, Nvidia's margins have also repeatedly been expanding.

Gross margins climbed to 67%, a 30 basis points increase sequentially, or an impressive 150 basis points increase compared to last year. Consequently, operating income and net income also skyrocketed. Nvidia's net income increased 13% quarter-over-quarter and 62% compared to Q3 2020. EPS came in at $1.17, 60% higher year-over-year as well.

Is NVDA Stock Too Expensive?

Nobody can argue that Nvidia's growth is nothing but outstanding. Nvidia is well-positioned to profit extensively from several trends, some of which have only just started to gain traction, such as VR/AR.

Meta Platfroms' (FB) all-in bet on the development of the Metaverse is a testament to the potential size of this new market. In addition, Nvidia's recent acquisition of Omniverse Avatar should be a great asset in this growing market moving forward. There is even a virtual interview through Omniverse with Nvidia's CEO, which showcases the technology platform's capabilities in generating interactive AI avatars.

Additionally, the crypto-economy should continue to gain heightened adoption, which will likely sustain the ongoing shortage in graphics cards, allowing Nvidia to retain its very beneficial pricing power over the next few years.

However, we can't just ignore that the stock is currently trading at a trailing P/E ratio of around 93x and a forward P/E ratio near 60x. Hence, Nvidia's total return prospects could be relatively thin for current investors.

Furthermore, capital returns remain insignificant to counterbalance a probable valuation compression. The stock's dividend remains inconsequential and mostly plays the role of a "token," while buybacks would hardly benefit shareholders at the stock's current valuation levels, in my opinion.

Wall Street’s Take

Turning to Wall Street, Nvidia has a Strong Buy consensus rating, based on 24 Buys and two Holds assigned in the past three months. At $360.17, the average Nvidia price target implies 19% upside potential.

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Disclosure: At the time of publication, Nikolaos Sismanis did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates  Read full disclaimer >