10 Best Augmented Reality Stocks to Buy Now

Published on May 4, 2021 at 7:41 am by Manal Shahid in Hedge Funds, News

In this article we will take a look at the 10 best augmented reality stocks to buy now. You can skip our detailed analysis of these companies and go directly to the 5 Best Augmented Reality Stocks to Buy Now.

There is a growing proliferation of Augmented Reality (AR) across the world and many tech companies believe that AR, which digitally enhances real-world surroundings, is the next big computing platform. The importance of AR has already been realized by many businesses in the COVID-19-hit world which has created a niche for virtual working and learning environments. AR practices are being adopted in consumer, retail, gaming, entertainment, manufacturing, health, and tourism sectors across the world.

According to Research and Markets, the global AR and VR markets are expected to be worth $72.7 billion in 2024, compared to $10.7 billion in 2019, growing at a CAGR of 42.9%. The biggest factor driving the growth of the AR market is rising investments. Companies like Apple Inc. (NASDAQ: AAPL), Facebook, Inc. (NASDAQ: FB), Alphabet Inc. (NASDAQ: GOOG), Intel Corporation (NASDAQ: INTC), and QUALCOMM Incorporated (NASDAQ: QCOM) are investing heavily in the AR market.

Apple Inc. (NASDAQ: AAPL) has recently launched the ARKit 4, the latest version of its open-source augmented reality development tools. It creates a new way to access depth information on the iPad Pro, along with location anchoring and face tracking. Apple Inc. is currently working on two AR projects: an augmented reality headset which is expected to release in 2022, and augmented reality glasses coming at a later date. These exciting products is why Apple Inc. is one of the best augmented reality stocks to buy now.

Similarly, Alphabet Inc. has also introduced its ARCore which is compatible with most smartphones. Alphabet Inc. (NASDAQ: GOOG)’s Google is now accepting submissions for street view photos which shows that the ARCore has improved so much that smartphone pictures can also be incorporated with Google Maps.

Another company that is making use of AR in an innovative way is Etsy, Inc. (NASDAQ: ETSY) which recently introduced augmented reality support in its phone app. This allows users to overlay Etsy, Inc. (ETSY) products on different spaces to give a realistic view of what it would look like in real life. This feature will also help Etsy, Inc. cut back on product returns. Etsy, Inc. (ETSY) stock has gained 166% over the last 12 months.

Augmented Reality in Games

In 2016, augmented reality burst into the mainstream when the video game Pokemon Go was released. It was downloaded a 100 million times in its first month which was a huge success for video game company Nintendo Co., Ltd. (NYSE: NTDOY) as its stock rose by 120% in just 3 days. The president of Nintendo Co., Ltd. (NYSE: NTDOY) expressed interest in AR technology and said that the company is currently exploring new ways to use and expand the technology. It is important to note that AR is not only useful in entertainment, shopping, or video games, but has applications in many sectors such as automotive, healthcare, and education as well.

Uses of Augmented Reality

Augmented reality modeling is being used for 3D visualization in surgeries, to power head-up displays in vehicles and create photorealistic AR in smartphones, and 360-degree visualization of tourist destinations amongst many other innovative ways. A Deloitte research report states that artificial intelligence and augmented reality will transform the traditional healthcare business model with the introduction of AR/MR-enabled hands-free solutions and diagnostic tools. For example, a start-up called AccuVein uses AR by using a handheld scanner that shows nurses and doctors where the patient’s veins are located. It has been used on more than 10 million patients till now and makes finding a vein on the first try 3.5x more likely.

As of 2020, the market for AR technology is estimated to be worth $15.3 billion. The time for investing in the best augmented reality stocks is right now as the commercial use of the technology has grown exponentially with market leaders like Microsoft Corporation (NASDAQ: MSFT), Alphabet Inc. (NASDAQ: GOOG), Facebook, Inc. (NASDAQ: FB), and Apple Inc. (NASDAQ: AAPL) leading the way.

Photo by Uriel Soberanes on Unsplash

Let’s start our list of the 10 best augmented reality stocks to buy now.

Best Augmented Reality Stocks to Buy Now

10. Vuzix Corporation (NASDAQ: VUZI)

Market Cap: $1.343 billion
Number of Hedge Fund Holders: 10

Vuzix Corporation (NASDAQ: VUZI) designs, manufactures, markets, and sells augmented reality (AR) wearable display and computing devices for consumer and enterprise markets. The primary application of its smartglasses is business which is why its products are being used by healthcare providers, manufacturers, field service providers, warehouse workers, and automotive companies in their workflow. By designing enterprise solutions, Vuzix Corporation (NASDAQ: VUZI) has created a niche within the larger AR field. On January 25, the company announced that it has partnered with the overseas subsidiaries of KDDI Group, one of Asia’s largest telecommunications providers, to provide its smart glasses to customers across the globe. Vuzix’s earnings report states that its fourth quarter revenue increased more than 100% year-over-year to over $4 million, versus $1.96 million in the 2019 quarter. In the past year, Vuzix has seen share prices increase from less than a dollar to more than $24 per share. Considering it has only scratched the surface of its market potential, those who invest today are likely to see strong returns making it one of the best augmented reality stocks to buy now.

At the end of the fourth quarter of 2020, 10 hedge funds in the database of Insider Monkey held stakes in the company, up from 6 funds in the previous quarter.

9. Autodesk, Inc. (NASDAQ: ADSK)

Market Cap: $65.23 billion
Number of Hedge Fund Holders: 66

Autodesk, Inc. (NASDAQ: ADSK) is a California-based software corporation that makes software products and services for the architecture, engineering, construction, manufacturing, media, education, and entertainment industries. The company is best known for its AutoCAD (Computer-Aided Design) software which is why it is one of the best augmented reality stocks to buy now. Autodesk also offers digital prototyping software, consumer software, and products like Maya that are popular tools for movie special effects and video game animations. The company began to implement augmented reality capability in its products in 2017 when it first added AR support to its Forge platform. As AR becomes widely adopted, Autodesk, Inc. (NASDAQ: ADSK) has become one of the key companies supplying the creative platforms to make that happen. According to Autodesk’s latest quarterly earnings report for 2021, the first quarter year-over-year revenue growth was 20% while the GAAP and Non-GAAP operating margins expanded by 11 and 10 percentage points respectively. The WSJ reports that 13 analysts have given Autodesk, Inc. (NASDAQ: ADSK) a Buy rating.

In the Q3 2020 investor letter, RiverPark highlighted a few stocks and Autodesk Inc. (NASDAQ:ADSK) is one of them. Here is what RiverPark said:

“Autodesk: Autodesk was our final top detractor for the quarter. The company reported second quarter results that exceed expectations across all key metrics, but slightly lowered its billings and revenue outlook (by 1%), anticipating a slow recovery in the U.S. and U.K. In the second quarter, revenue was $913 million, up 15%, with subscription revenue (92% of total revenue), up 27% year over year, and a 29% Non-GAAP operating margin, up 500 basis points year over year (non-GAAP EPS of $0.98, increased 51% year over year).

Autodesk has a near monopoly on software for designing, building and managing buildings, as well as software for infrastructure and manufacturing plants, prototyping software for manufacturers of products (including autos, machinery and consumer products) and document sharing. The company expects to grow revenue 15%-19% annually over the next several years (which they were exceeding pre-COVID), and, as we have seen happen in similar SaaS conversions, as revenue scales, operating margins are expected to expand significantly from second quarter’s 29% to more than 40%, in-line with peers. We believe that ADSK shares can compound along with its free cash flow growth (expected to be 20%+ per year) over the next several years.”

8. Snap Inc. (NYSE: SNAP)

Market Cap: $94.182 billion
Number of Hedge Fund Holders: 63

Snap Inc. is a California-based camera and social media company that has developed and maintains several technological products and services including Snapchat, Bitmoji, and Spectacles. The company has been investing in AR for years. It started with creating filters that overlay on people’s faces in selfies to create effects. Snap Inc. (NYSE: SNAP) has confirmed that it is set to release its new augmented reality glasses which will put digital content in front of peoples’ eyes at all times. The company has already demonstrated how AR can generate money and offer value to users for example, its shoppable lenses allow users to try on different fashion pieces from the comfort of their homes.

In its latest quarterly report, Snapchat has presented an optimistic outlook for the year ahead with an expected revenue growth of approximately 50%. In Q1 of 2021, Snap Inc. (NYSE: SNAP) revenue increased by 66% to $770 million, compared to the previous year. Moreover, the number of daily active snapchat users engaging with the app’s reality lenses grew more that 40%. The company also announced a partnership with Samsung which will feature Snapchat Lenses on select new smartphones. The company’s strong quarterly report makes a bullish case for the SNAP stock making it one of the best augmented reality stocks to buy now.

At the end of the fourth quarter of 2020, 63 hedge funds in Insider Monkey’s database held stakes in SNAP. Stephen Mandel’s Lone Pine Capital is the biggest stakeholder in the company, with 19.5 million shares.

In their Q4 2020 investor letter, RiverPark highlighted a few stocks and Snap Inc (NYSE:SNAP) is one of them. Here is what the fund said:

“Snap shares were our top contributor for the quarter driven by the company’s blow out third quarter earnings. The company grew revenue 52% year over year to $679 million (exceeding Street expectations by $120 million), and management guided to continued strong revenue growth of 47%-50% for the fourth quarter (more than $100 million greater than current estimates). Revenue growth was driven by strong engagement as well as better-than-expected monetization: Daily Active Users grew 18% year over year, they spent more time on the app (total daily time spent by Snapchatters watching Shows increased by over 50%) and created more Snaps (average Snaps created grew 25% year over year), while average revenue per user (ARPU) grew 28%. Additionally, SNAP delivered its most profitable quarter as a public company–adjusted EBITDA turned positive to $56 million for an 8% margin, vastly exceeding expectations of a $45 million loss.

Snap, known for its mobile-only picture and messaging application Snapchat, has a large and growing user base (249 million DAU) that is extremely engaged, opening Snapchat over 30 times every day, and creating, on average, more than 4 billion Snaps per day. Additionally, with less than $3 billion in run rate revenue and an ARPU that is about 1/2 that of Twitter and 1/3 that of Facebook, Snap should be able to more fully monetize its audience as it continues to create more services—content, advertising, gaming and developer tools.”

7. Sony Group Corporation (NYSE: SONY)

Market Cap: $122.85 billion
Number of Hedge Fund Holders: 28

Sony Group Corporation (NYSE: SONY) designs, develops, produces, and sells electronic equipment, instruments, and devices for the consumer, professional, and industrial markets worldwide. It recently showed prototypes of augmented reality headsets that are being used in the Ginza Sony Park in Japan. The company has also developed the SmartEyeGlass which has a SED-100A holographic display component and is making waves in the AR world. The SmartEyeGlass features a built-in 3MP camera, speaker, microphone, Wi-Fi and Bluetooth 3.0 connectivity, and several other features designed to deliver a fully immersive augmented experience to its users. The Japanese electronics and entertainment giant reported that net income for fiscal year 2020 grew 101% to $10.7 billion and its total sales increased by 9% to $82.5 billion which makes Sony Group Corporation (NYSE: SONY) one of the best augmented reality stocks to buy now.

6. QUALCOMM Incorporated (NASDAQ: QCOM)

Market Cap: $155.63 billion
Number of Hedge Fund Holders: 85

QUALCOMM Incorporated (NASDAQ: QCOM) engages in the development and commercialization of foundational technologies and products are used in mobile devices and other wireless products, including network equipment, broadband gateway equipment, consumer electronic devices, and other connected devices worldwide. The company is very well-positioned to capitalize on the mainstreaming of augmented reality. In 2018, QUALCOMM Incorporated (NASDAQ: QCOM) announced that it will develop a chipset specifically for AR and VR applications which will be a turn-key solution for developers who want to bring AR glasses to the marketplace. The company introduced its first augmented reality (AR) reference design based on the Qualcomm Snapdragon XR1 Platform which is equipped to deliver high-performance, immersive experiences, and lower power consumption.

During the first quarter of fiscal 2021, the company returned $1.2 billion to stockholders, including $739 million, or $0.65 per share, of cash dividends paid and $444 million through repurchases of 3 million shares of common stock. Its current revenue estimates for the second quarter of 2021 are approximately $7.2-$8.0 billion making it a top contender in the best augmented reality stocks to buy now.

Amongst the hedge funds being tracked by Insider Monkey at the end of the fourth quarter of 2020, Matrix Capital Management is a leading shareholder in the firm with 3.3 million shares worth more than $508.4 million.

Alger Spectra Fund, in their Q1 2021 investor letter, mentioned QUALCOMM Incorporated (NASDAQ: QCOM). Here is what Alger Spectra Fund has to say about QUALCOMM Incorporated in their letter:

“Long position Qualcomm Inc. were among the top detractors from performance. Qualcomm is a leading semiconductor company with strong positions in telecommunications end markets that position the company as a primary beneficiary of the innovative 5G network standard roll out. Qualcomm is acknowledged as having the best technology specs for 5G chip sets as evidenced by signing up all 75 major OEMs including Apple. Additionally, beyond handsets, Qualcomm has meaningful growth drivers, including the Internet of Things, automobiles, industrials and gaming that provide the company with potential for generating increased earnings.

While Qualcomm was a notable positive contributor to the portfolio’s absolute and relative returns in 2020, during the first quarter, the share price declined and the position detracted from performance. Market demand for chips has been strong; however, Qualcomm hasn’t been able to fully exploit the demand as it is capacity constrained. Expectations were high for Qualcomm and while the quarter generally exceeded consensus estimates and forward estimates did rise, the street was anticipating a stronger positive surprise. We believe the production capacity constraints should abate in the second half of this year.”

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