Sunnyvale, Calif.-based spatial data company and 3D camera maker Matterport, Inc. (MTTR - Get Rating) went public through a reverse merger on July 23. The company merged with blank check company Gores Holdings VI, which is backed by billionaire investor Alec Gores. MTTR’s enterprise value post-merger was $2.90 billion.

The company raised $310 million from Gores Holdings VI and $295 million through PIPE investments. The stock has gained 39.1% in price since its debut.

MTTR sells 3D cameras that facilitate virtual tours of real estate. However, the company gained popularity after launching an iPhone app in May 2020 hat captures 3D models of homes. Regarding this software launch, MTTR Chairman and CEO RJ Pittman said, “We signed more customers in the first three days of the beta launch than the first eight years of the company.”

Here’s what could shape MTTR’s performance in the near term:

Robust Demand

On September 9, MTTR signed an agreement with Cushman & Wakefield to launch its 3D virtualization tool in Japan. Considering Japan’s highly competitive real estate sector, MTTR’s technology should allow Cushman & Wakefield to deliver deeper customer engagement, thereby boosting their client holdings.

MTTR’s Pro2 3D camera, which is used to capture 3D pictures of real estate to facilitate virtual housing tours, was launched on Amazon.com, Inc.’s (AMZN) e-commerce website in Europe. The product is expected to boost MTTR’s camera sales substantially over the long term. Also, MTTR expanded its digitization offerings to 51 cities in the United States and four additional cities in the United Kingdom. This demonstrates MTTR’s growing footprint in the 3D software space.

Mixed Financials

MTTR’s subscription revenues increased 53% year-over-year to $15 million in its  fiscal second quarter, ended June 30. This can be attributed to a 158% rise in total subscribers to 404,000. Its total revenues came in at $29.50 million, up 21% from the same period last year.

However, the company’s loss from operations widened 168.7% from its year-ago value to $5.78 million. Its net loss and loss per share worsened substantially year-over-year to $6.21 million and $0.62, respectively.

Consensus Rating and Price Target Indicate Potential Upside

Each of the four Wall Street analysts that rated MTTR has rated it Buy. The 12-month median price target of $20.50 indicates a 3.8% potential upside from yesterday’s closing price of $19.75. The price targets range from a low of $20.00 to a high of $22.00.

POWR Ratings Reflect Uncertainty

MTTR has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

MTTR has a C grade for Quality and Growth. The company’s gross profit increased 38.5% year-over-year to $17.81 million. However, its net loss worsened 68.3% from the same period last year to $6.21 million, justifying the Quality grade. In addition, the company’s mixed financials reported in the last quarter justify the Growth grade.

Of the 146 stocks in the D-rated Software – Application industry, MTTR is ranked #94.

Beyond what I’ve stated above, you can view MTTR ratings for Value, Stability, Sentiment, and Momentum here.

Click here to check out our Software Industry Report for 2021

Bottom Line

MTTR is at the forefront of the 3D software market. With state-of-the-art products and services and an international market presence, MTTR is expected to soon emerge as an industry leader. However, the company’s operational inefficiencies are a cause for concern. Despite substantial top-line growth, MTTR’s ROE is negative. Thus, we think investors should wait until the company’s profit margins improve before investing in the stock.

How Does Matterport (MTTR) Stack Up Against its Peers?

While MTTR has an overall C Rating, one might want to consider looking at its industry peers, Open Text Corporation (OTEX - Get Rating) and Commvault Systems, Inc. (CVLT - Get Rating), which have an overall A (Strong Buy) rating.

MTTR shares were trading at $20.97 per share on Thursday afternoon, up $1.22 (+6.18%). Year-to-date, MTTR has gained 94.87%, versus a 19.89% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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