The tech sector has retreated since the beginning of the year. The Fed’s decision to raise interest rates several times this year has made investors question the sector’s growth prospects. However, an increasing societal dependence on the digital world is projected to make the demand for technology solutions near inelastic.
The metaverse frenzy has begun to gain traction and is being hailed by global tech giants as the future of technology. According to ReportsandData, the global metaverse market is expected to reach $872.35 billion by 2028, growing at a 44.1% CAGR. Because increasing numbers of companies are jumping into the metaverse bandwagon, many fundamentally sound stocks have yet to be identified by many investors.
We think Tencent Holdings Limited (TCEHY), Shopify Inc. (SHOP), Snap Inc. (SNAP), and Match Group, Inc. (MTCH) are four such under-the-radar metaverse stocks that hold immense upside potential. So, it could be wise to add them to one’s watchlist.
Tencent Holdings Limited (TCEHY)
Headquartered in Shenzhen, the People’s Republic of China, TCEHY, an investment holding company, provides value-added and online advertising services internationally. It operates through VAS; Online Advertising; FinTech, Business Services, & Other segments.
On Jan. 27, 2022, TCEHY included the video game engine Unreal Engine in its messaging platform QQ. Experts believe this to be a part of the company’s foray into the metaverse, which is predicted to boost its business prospects.
TCEHY’s revenues increased 13.5% year-over-year to RMB 142.37 billion ($22.39 billion) for the third quarter, ended Sept. 30, 2021. Its gross profit came in at RMB 62.75 billion ($9.87 billion), up 10.8% year-over-year, while its profit for the period was RMB 40.08 billion ($6.3 billion), up 3% year-over-year. Also, its EPS increased 2.8% year-over-year to RMB 4.074.
Analysts expect TCEHY’s revenue to increase 11.2% year-over-year to $98.19 billion for its fiscal 2022. Its EPS is estimated to increase 13.4% to $2.37 for fiscal 2022. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. The stock closed yesterday’s trading session at $59.39.
TCEHY has a B grade for Stability and Sentiment in our POWR Ratings system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Shopify Inc. (SHOP)
Headquartered in Ottawa, Canada, SHOP, a commerce company, provides a commerce platform and services in Canada, the United States, the United Kingdom, Australia, Latin America, and internationally.
On Oct. 28, 2021, Amy Shapero, SHOP’s CFO, said, “Our results show that Shopify is executing well, giving our merchants the tools, they need to compete in differentiated ways in a growing number of markets. We remain focused on simplifying commerce for our merchants so they can take full advantage of what digital makes possible and reimagine retail.”
SHOP’s subscription solutions revenue increased 37.1% year-over-year to $336.21 million for the third quarter, ended Sept. 30, 2021. Its comprehensive income came in at $1.14 billion, up 483.5% year-over-year. Furthermore, its EPS was $9.00, up 484.4% year-over-year.
For its fiscal 2022, SHOP’s revenue is expected to grow 32.8% year-over-year to $7.65 billion. Its EPS is expected to grow 9.3% year-over-year to $8.68 for fiscal 2022. The stock closed yesterday’s trading session at $815.76.
Snap Inc. (SNAP)
SNAP operates as a camera company in the United States and internationally. The Venice, Calif.-based company believes that reinventing the camera represents its best opportunity to improve the way people live and communicate.
On Oct. 21, 2021, Evan Spiegel, CEO, said, “We’re now operating at the scale necessary to navigate significant headwinds, including changes to the iOS platform that impact the way advertising is targeted, measured, and optimized, as well as global supply chain issues and labor shortages impacting our partners.”
For its fiscal third quarter, ended Sept. 30, 2021, SNAP’s revenue increased 57.3% year-over-year to $1.07 billion. Its net loss came in at $71.96 million, versus $199.85 million in the year-ago period. In addition, its adjusted EBITDA came in at $174.2 million, up 209.1% year-over-year.
SNAP’s revenue is expected to grow 36.8% year-over-year to $5.5 billion in its fiscal year 2022. Its EPS is expected to grow 48.6% year-over-year to $0.55 for its fiscal year 2022. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. The stock closed yesterday’s trading session at $28.30.
Match Group, Inc. (MTCH)
MTCH provides dating products worldwide. The company’s portfolio of brands includes Tinder, Match, Meetic, OkCupid, Hinge, Pairs, PlentyOfFish, OurTime, and various other brands. MTCH is headquartered in Dallas, Tex.
MTCH’s total revenue increased 25.3% year-over-year to $801.84 million for the third quarter, ended Sept. 30, 2021. Its operating income came in at $220.59 million, up 10.2% year-over-year. And the company’s adjusted EBITDA was $285.33 million, up 14.5% year-over-year.
Analysts expect MTCH’s revenue to be $3.63 billion in its fiscal 2022, representing a 21.1% year-over-year increase. In addition, the company’s EPS is expected to increase 31.8% year-over-year to $2.57 for its fiscal 2022. The stock closed yesterday’s trading session at $106.50.
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TCEHY shares were trading at $57.96 per share on Friday morning, down $1.44 (-2.42%). Year-to-date, TCEHY has declined -0.58%, versus a -9.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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