The current reality in the Coronavirus economy is that we are all stuck at home with most of us going a little bit stir crazy.
So if your reality stinks, then maybe that is a big pull towards virtual reality. That is why I want to share the top 4 stocks benefiting from the trend towards virtual reality home entertainment: Apple (AAPL), Qualcomm (QCOM), Sony (SNE), and Snap Inc. (SNAP).
Let’s dig into the details on each of these uniquely attractive stocks at this time.
AAPL is already a staple in most portfolios given the strength of the iPhone and continued innovation. However, AAPL has received some criticism for its manufacturing operations in China, the company continues to push the tech envelope with breakthrough innovation. AAPL executives deserve credit for looking outside of their in-house talent for tech diversification.
Apple will soon acquire NExtVR, a company that streams virtual and augmented reality entertainment. This $100 million acquisition expands AAPL’s virtual reality offerings to live sports and entertainment. AAPL will also acquire NextVR’s 40+ tech patents including key partnerships with NBA, Wimbledon, Fox Sports, live music and more.
If Apple CEO Tim Cook’s vision for a VR and AR (augmented reality)-dominated future are accurate, these technologies will be quite the boon to the company’s bottom line. AAPL already provides ARKit development tools to help start-up businesses make full use of augmented reality technology. AAPL currently trades around $254 which is a nice value compare to the average target price of $311.
Sony has been at the forefront of gaming technology including virtual reality since the get-go. The company’s virtual reality headset is fully compatible with its video game console yet some gamers have been hesitant to take the VR plunge with SNE due to the technology’s lofty price tag. However, SNE’s loyal customer base is likely to stick with the company rather than jump ship for an unfamiliar VR product provided by the likes of HTC or the Oculus Quest. Furthermore, SNE has exclusive licenses for virtual reality games such as Resident Evil and Tetris Effect. Gamers far and wide agree Tetris Effect provides one of the most immersive and enjoyable VR experiences around.
SNE stands to benefit from the coronavirus pandemic as that many more people are stuck indoors, looking for a means of escaping our increasingly dystopian reality. The company’s VR technology provides that escape. Countless casual gamers will seriously consider Sony PlayStation Virtual Reality based on the company’s name brand alone. SNE was priced at $70 on February 4. Today, the stock trades at $60. But when you look back at the long history of growth and innovation you understand why shares rallied 42% last year and 103% over the past 5 years. That past performance does give some comfort in anticipation of future quality results.
Snap Inc. (SNAP)
SNAP is a camera and augmented reality business that generates the bulk of its revenue from Snapchat advertisements. Actually I think the bulk of its money comes from my 2 daughters (aged 18 and 20) who use it ALL DAY LONG to communicate with their friends.
The hope is the company’s augmented reality technology will expand its revenue streams as time progresses. Because if augmented reality used on smartphones is adopted by the masses, or at least a considerable portion of the Generation Z age cohort, SNAP will greatly benefit in terms of profit and shar price.
At the moment, SNAP’s Lens Studio is quite popular yet analysts question whether the company’s augmented reality glasses will spur meaningful revenue across the long haul. SNAP was priced near $30 earlier this winter. The stock dropped all the way down to $8 and change during the coronavirus pandemic selloff. The fact that SNAP is adjusting its offerings in accordance with current events such as the coronavirus outbreak is certainly a good sign. Furthermore, TipRanks reports 18 analysts have a “Buy” rating on SNAP, making it quite clear the investment community is fairly bullish on this growing mobile and AR company.
Most investors are aware of the fact that QCOM is a power player in the semiconductor space. However, plenty are unaware of the fact that QCOM also makes money from virtual reality technology. QCOM processors power virtual and augmented reality headsets designed for an array of display mediums. In fact, QCOM even made its own unique virtual reality headsets for software specialists to develop games on. QCOM has also partnered with Niantic Labs, the creator of the insanely popular Pokemon Go game, to develop augmented reality glasses.
Add in the fact that many of the virtual reality applications of the future will operate on QCOM Snapdragon mobile processors and it is easy to understand why so many investors are bullish on this stock. QCOM soared 60% last year, but is now down nicely from the highs. And well under the average target of $93. That includes a fresh target of $98 put out by Citigroup analysts just a week ago. Add it up and you appreciate the attractiveness of this growth and value story.
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AAPL shares were trading at $264.88 per share on Wednesday afternoon, up $5.45 (+2.10%). Year-to-date, AAPL has declined -9.58%, versus a -14.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks. More...
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