Broadly speaking, metaverse refers to an alternate reality, a ‘mirror world’ where people work and socialize, a collective shared virtual space created by the convergence of physical reality and virtual reality. With cryptocurrencies and blockchains now coming to the fore, with a growing understanding of their scope, metaverse has been gaining steam.
Recently, several tech and gaming companies have been increasing efforts to build a metaverse. As a result of this push, the virtual reality market is expected to grow by $75.57 billion, at a 55.3% CAGR , between 2020 – 2025.
Given this backdrop, we think it could be wise to invest in tech stocks Microsoft Corporation (MSFT), Meta Platforms, Inc. (FB), Taiwan Semiconductor Manufacturing Company Limited (TSM), and Immersion Corporation (IMMR) to cash on the emergence of this revolutionary technology. These stocks are among the top 11 holdings in the Roundhill Ball Metaverse ETF (META), which has gained 8.8% over the past month, and 3% over the past five days.
Microsoft Corporation (MSFT)
MSFT is a Redmond, Wash.-based software behemoth that provides software services, solutions, and devices all over the world. The company has a more than $2 trillion market capitalization.
On November 1, MSFT partnered with data-driven commerce platform, Bango, to enable Telcos, data providers, banks, and retailers to bundle MSFT offerings as a part of their customer offers. The partnership is expected to leverage the Bango platform and appeal to bundled media subscriptions.
In September, the company declared a multi-year commitment to provide Microsoft security solutions for cyber insurance, through an agreement with cyber insurance company At-Bay. Ann Johnson, Microsoft’s Corporate Vice President of Security, Compliance & Identity (SCI) Business Development, said, “Microsoft’s partnership with At-Bay brings important clarity and decision-making support to the market as organizations everywhere seek a comprehensive way to empower hybrid workforces with stronger, centralized visibility and control over cloud applications boosting security and productivity.”
MSFT’s total revenue increased 22% year-over-year to $45.32 billion in its fiscal first quarter ended September 30. Its operating income climbed 27.5% from the prior-year quarter to $20.24 billion. Its net income and EPS stood at $20.51 billion and $2.71, respectively, registering an increase of 47.6% and 48.9% year-over-year.
Analysts expect MSFT’s EPS to improve 14% year-over-year to $9.18 in the current year (fiscal 2022), while the Street’s $196.37 billion revenue estimate for the current year indicates a 16.8% rise from the prior year. In addition, the stock has beaten consensus EPS estimates in each of the trailing four quarters.
MSFT’s stock has gained 62.7% in price over the past year to close yesterday’s trading session at $329.37. It has gained 48.1% year-to-date.
MSFT’s strong fundamentals are reflected in its POWR Ratings. The stock has an B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Stability, Sentiment, and Quality. It is ranked #17 of 160 stocks in the Software – Application industry. To see the additional POWR Ratings for Growth, Value, and Momentum for MSFT, click here.
Meta Platforms, Inc. (FB)
FB is the biggest social media company in the world. As the owner of WhatsApp, Instagram, and various other companies, FB has operations in numerous fields. The company is based in Menlo Park, Calif.
On October 28, FB CEO Mark Zuckerberg introduced Meta, bringing Facebook’s app and technologies under a new brand, with the expectation of helping people connect and grow their businesses.
For its third fiscal quarter, ended September 30, FB’s total revenue increased 35.1% year-over-year to $29.01 billion. Its income from operations rose 29.6% from the prior-year quarter to $10.42 billion. Its net income improved 17.2% from the same period last year to $9.19 billion, while EPS increased 18.8% year-over-year to $3.22.
A $13.99 consensus EPS estimate for the current year (fiscal 2021) indicates a 38.7% year-over-year increase. Likewise, the $118.01 billion consensus revenue estimate for the current reflects a 37.3% improvement from the prior year. Furthermore, FB has an impressive surprise earnings history; it has topped consensus EPS estimates for each of the trailing four quarters.
The stock has gained 25.4% in price over the past year and 20.8% year-to-date to close yesterday’s trading session at $329.98.
Under POWR Ratings, FB has a Quality grade of A. In the 78-stock Internet industry, it is ranked #7. Click here to see the additional POWR Ratings for FB (Growth, Value, Momentum, Stability, and Sentiment).
Taiwan Semiconductor Manufacturing Company Limited (TSM)
TSM is an integrated circuit (IC) and semiconductor manufacturer that is based in HsinChu, Taiwan. The company provides customer service, account management, and engineering services.
On October 26, TSM introduced its N4P Process for enhancing its 5-Nanometer technology platform, marking the third major enhancement of its kind. The process is expected to strengthen the company’s portfolio of advanced logic semiconductor technologies.
In September, the company committed to reaching net-zero emission levels by 2050, thereby addressing stakeholders’ concerns about climate change and related issues.
TSM’s net revenue increased 16.3% year-over-year to $14.88 billion in its third fiscal quarter, ended September 30. Its gross profit improved 11.7% from the same period last year to $7.63 billion. Its net income and earnings per ADR came in at $5.61 billion and $1.08, respectively, registering a 13.9% and 13.8% increase, respectively, from the prior-year quarter.
The Street’s $1.11 EPS estimate for the current quarter (ending December 2021) reflects a 14.4% improvement from the prior-year quarter. Likewise, the Street’s $15.61 billion revenue estimate for the current quarter indicates a 23.1% year-over-year rise. In addition, TSM has topped the Street’s EPS estimates in three out of the trailing four quarters.
TSM’s stock has gained 36.1% in price over the past year to close yesterday’s trading session at $114.12. It has gained 4.7% year-to-date.
It’s no surprise that TSM has an overall B rating which translates to Buy in our POWR Rating system. The stock has an A grade for Quality, and a B grade for Momentum, Stability, and Sentiment. It is ranked #44 of 99 stocks in the Semiconductor & Wireless Chip industry. The industry is rated B.
Click here to see the additional POWR Ratings for Growth and Value for TSM.
Immersion Corporation (IMMR)
IMMR in San Jose, Calif., designs and develops haptic technologies that enable people to use touch to experience digital products. The company’s offerings include technologies, patents, combined licenses, and software development kits (SDKs).
On August 12, IMMR announced its agreement with TITAN Haptics to provide the company’s haptic patent licenses, incorporated with TITAN actuators, for mobile phones and Original Equipment Manufacturers (OEMs). Regarding the agreement, Chris Ulrich, CTO, Immersion, said, “We’re pleased to be partnering with TITAN Haptics to make it easier for mobile phone OEMs, especially those in China, to gain access to our innovative haptic patent portfolio.”
Also in August, IMMR expanded its license with Stanley Electric Co., Ltd., a lightning product and electronic component supplier, to use haptics in the automotive industry. The expansion should add to IMMR’s revenue stream.
For its second fiscal quarter, ended June 30, IMMR’s total revenues climbed 94.2% year-over-year to $11.01 million. Its operating income stood at $5.81 million, up substantially from its negative year-ago value. Its non-GAAP net income increased 809.9% from the same period last year to $7.23 million, while non-GAAP net income per share improved 666.7% year-over-year to $0.23.
A $0.63 consensus EPS estimate for the current year (fiscal 2021) indicates a 75% year-over-year increase. Likewise, the $36.59 million consensus revenue estimate for the current year reflects a 20.1% improvement from the prior year. Furthermore, IMMR has beaten consensus EPS estimates in three of the trailing four quarters.
The stock has gained 48.9% in price over the past year and 21.3% over the past three months, to close yesterday’s trading session at $9.17.
IMMR’s POWR Ratings reflect this promising outlook. The stock has an overall B rating which equates to Buy in our proprietary rating system. The stock has a Quality grade of A, and a Value and Sentiment grade of B. It is ranked #20 in the Software – Application industry.
In addition to the POWR Rating grades we’ve stated above, one can see IMMR ratings for Growth, Momentum, and Stability here.
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MSFT shares were trading at $332.58 per share on Tuesday afternoon, up $3.21 (+0.97%). Year-to-date, MSFT has gained 50.51%, versus a 24.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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