Metaverse Hype Is Over, Value Stocks Appear | Habit Securities Intelligence
Affected by the Fed’s interest rate cut and international geopolitical factors, US stocks continue to be under pressure, and the Metaverse hype is gradually fading with short-term bumpy rides. However, value stocks deserve long-term attention. Feb, 24, 2022
All investments involve the risk of potential investment losses as well as the potential for investment gains.
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The Development Logic of Metaverse
Metaverse refers to the vast online virtual world that integrates virtual reality, augmented reality, entertainment, gaming, remote working and learning, fundamentally breaks through existing Internet limitations.
Metaverse can be defined as a digital space that is realistic to the physical world through virtual and augmented reality hardware, that is, the sum of all the processes and protocols that drive the third-generation Internet and improve the fluidity and interoperability of virtual spaces.
The Investment Direction of Metaverse
The industrial chain of Metaverse covers a wide range:
- Interactive technologies such as VR/AR virtual reality are needed to satisfy users’ immersive experience;
- 5G and cloud computing technologies ensure that multiple users are online and reduce latency;
- The breakthrough of computing power algorithm drives the upgrade of rendering mode;
- Blockchain technology provides identity recognition;
- and AI technology provides the driving force for the expansion of metaverse.
At present, the most mainstream investment allocations are in these three directions:
- High-barrier Computing Power industry:
In the field of high-performance GPUs, NVIDIA ($NVDA), the world’s largest graphics processing and AI chip manufacturer, has a strong competitive advantage. In the field of graphics rendering, Unity ($U) has a significant first-mover and leading edge. - VR/AR Hardware industry:
In the next 5 years, the annual sales of VR/AR hardware is expected to reach 50 million units. If the hardware technology makes further breakthroughs, the sales in the medium and long term can reach 100 million units. Currently, it is still in the hardware development and content exploration period. Meta’s ($FB) Quest product has a first-mover advantage. - Scenario First-movers:
Based on existing hardware carriers, AI+ vision technology is used to achieve breakthroughs in content and services. Internet giants and traditional content companies explore content and service upgrades in the fields of games, videos, and broadcasts. Digital characters, motion capture and other technologies have begun to be applied. Meta ($FB) and Roblox ($RBLX) deserve high attention.
Metaverse will lead the technology in the next 20 years, bringing continuous and wide-ranging investment opportunities in the medium and long term. However, subject to technological and hardware progress, thematic investment opportunities remain the main focus in the short to medium term.
According to the latest research report of Goldman Sachs Bank, the penetration rate of virtual scenes in the game industry reaches 37%, the highest among the rates in all industries; 31% in music industry, 17% in retail industry, and the rates in other industries are relatively low.
Game industry is the most widely used scene of Metaverse technology.
Overall, the Metaverse is still in its early embryonic stage, and the hype in 2021 will subside, as U.S. stocks continue to be under pressure due to the Fed’s rate cut and the impact of international geopolitics. On February 3, Meta’s ($FB) stock price plummeted 26.39%, and its market value evaporated by 240 billion US dollars. The Metaverse sector fell and fluctuated. However, in the long run, Metaverse infrastructure will be gradually improved and gradually becoming more mature. Value stocks are worthy of attention. The time for investment layout has come.
Core Stocks of Metaverse — Meta ($FB), Roblox ($RBLX), Nvidia ($NVDA), Unity ($U)
Meta $FB
As the earliest company to deploy the Metaverse, it is regarded as the “wind vane” in the field of Metaverse. Meta owns the world’s largest social platform and has a strong user base.
Meta will cooperate with NVIDIA and other companies in upgrading the cloud computing technology. Meta is building the fastest artificial intelligence computer, which will be completed in mid-2022.
HSBC, Wolfe Research, and Mizuho have recently raised their target prices. The current share price of Meta is around $200, and there are still opportunities for upside.
Roblox $RBLX
Known as the “first share of metaverse”, Roblox is an interactive platform that integrates game creation and a large player community, and is currently the most applied product of the metaverse concept. Bank of America Securities raised its target price on Roblox to $84 from its original $78. Morgan Stanley lowered the target price of Roblox from $150 to $115 in January. Recently, Roblox has continued to decline due to unsatisfactory performances. It has now reached a low of $45, which is suitable for layout. Judging from the target prices given by various banks, there is still good room for growth in the future.
Nvidia $NVDA
Computing power is something the most needed in Metaverse, and computing power is the most basic facility in Metaverse. NVIDIA, as the “father of GPU”, is best at is solving the computing power problems, and its technology leads the exploration of chip technology in Metaverse field. Institutions such as Rosenblatt, Piper Sandler, and Bernstein gave “overweight” ratings and raised their target prices, while Mizuho raised the target price from $335 to $345. Nvidia’s stock price is currently around $223. Although it has become the most expensive semiconductor company by market value, institutions are optimistic about its future long-term profitability.
Unity $U
As a game engine service provider, Unity’s prospects have been optimistic by the majority. Credit Suisse lowered its target price for Unity from $185 to $180 on February 4. The previous valuation was higher, but recently it has entered a period of value return, which is suitable for layout.
All investments involve the risk of potential investment losses as well as the potential for investment gains.
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