In this article, we will discuss 11 best virtual reality stocks to buy. If you want to skip our detailed analysis of the virtual reality industry which highlights key trends and major players, you can directly go to 5 Best Virtual Reality Stocks to Buy.
In recent decades, tech stocks have become quite popular. They have remained high-growth stocks for the past decade, despite the recent market selloff. With the advent of virtual reality, the internet sector is going through another major shift that will alter the tech industry in a significant way.
According to a report, the compound annual growth rate of the global virtual reality education market alone is expected to be at 36% between 2021 and 2022. The market is projected to grow from $6.37 billion to $32.94 billion in 2026. The estimated CAGR is 39.7%. Similarly, according to a Fortune Business Insights report, the global virtual reality market is expected to grow to $84 billion in 2028 with a CAGR of 44.8%.
The COVID-19 pandemic negatively affected businesses worldwide. However, in 2020, the virtual reality industry grew by a staggering 42.2% compared to the 2017-19 YoY growth.
The American tech giants have been racing to become the top contenders in the virtual reality market. Microsoft Corporation (NASDAQ:MSFT) has recently revolutionized the world of labor with HoloLens 2. With the HoloLens, Microsoft Corporation (NASDAQ:MSFT) promises a 40% decrease in travel costs and a 14% decrease in construction costs. Moreover, the company also advertises an overall efficiency increase of 90%. Microsoft also won a $22 billion contract with the US army in 2021 for 120,000 custom-built HoloLens per year.
Similarly, Meta Platforms, Inc. (NASDAQ:FB) pledged $10 billion to develop the Metaverse, a virtual world concept by Mark Zuckerberg. The new Oculus Quest 2 VR headset by Meta Platforms, Inc. (NASDAQ:FB) is expected to capture a large market considering its popularity on the Steam platform. Sony Group Corporation (NYSE:SONY) was the leading giant in the VR gaming industry till Oculus came along to beat it. The company has now launched its new Playstation VR2 in hopes to beat Oculus.
Photo by David Dvořáček on Unsplash
Our Methodology
After our research on the virtual reality industry, we selected the eleven best virtual reality stocks to buy. These stocks were picked according to their hedge fund sentiment, analyst ratings, and other growth catalysts. Moreover, future prospects of profits such as acquisitions, new products, and projects were also taken into consideration while picking these stocks.
Best Virtual Reality Stocks to Buy
11. Matterport, Inc. (NASDAQ:MTTR)
Number of Hedge Funds: 19
Matterport, Inc. (NASDAQ:MTTR) is a spatial data company. The company has the largest collection of real-world places in VR and allows its users to create VR content. The company’s first-quarter 2022 financial reports revealed that the total subscribers of the company increased by 70% to 562,000 in a single year. The company currently has no debts and $600 million in cash.
In October 2021, Matterport, Inc. (NASDAQ:MTTR) completed the release of Matterport for Android in 175 countries around the world. In addition, the company has announced the expansion of its market in Japan, owing to the fact that the country has more than 324 million physical spaces that can be digitized.
In the first quarter of 2022, Matterport, Inc. (NASDAQ:MTTR) generated a revenue of $28.51 million, above the $27.47 million consensus estimates. Compared to the first quarter of 2021, the company had a revenue surge of around 6%. Over and above that, the subscription revenue for the company was $17.1 million, showing an increase of 24% YoY. The biggest subscriber surge was seen in Q4 2021 at 98%.
On May 11, Deutsche Bank analyst Bhavin Shah lowered the price target for Matterport, Inc. (NASDAQ:MTTR) from $9 to $7. The analyst kept a Buy rating on the company shares owing to its strong Q1 results.
Like Microsoft Corporation (NASDAQ:MSFT), Meta Platforms, Inc. (NASDAQ:FB), and Sony Group Corporation (NYSE:SONY), Matterport, Inc. (NASDAQ:MTTR) is one of the notable virtual reality stocks to watch.
Miller Value Partners mentioned Matterport, Inc. (NASDAQ:MTTR) in their fourth-quarter 2021 investor letter. Here is what the letter said:
“Matterport Inc. (MTTR) continued to be a strong contributor during the quarter after Matterport’s ability to contribute to the building of the metaverse was brought to light. The company reported 3Q results that missed consensus due to unexpected supply constraints and labor shortages in its capture services. The company reported total sales of $27.7M below the consensus of $29.1M but with gross profit beating coming in at $15.2M versus $15.1M expected leading to an EPS loss of -$0.06 slightly better than the consensus of -$0.07. The company lowered full-year revenue guidance to $107-110M down from $120-126M previously while also lowering FY22 topline guidance to 50% growth from 65% at the time of the PIPE transaction due to continuing supply constraints and labor shortage.”
10. Roblox Corporation (NYSE:RBLX)
Number of Hedge Funds: 61
Roblox Corporation (NYSE:RBLX) is an American video game company. The most significant product of the company is Roblox, an online game platform that allows users to program and play games created by other users. The platform allows VR gaming through Oculus Rift and HTC Vive on Windows PCs. Cathie Wood’s ARK Investment Management increased its activity in Roblox Corporation (NYSE:RBLX) by 202% in the first quarter of 2022 and held the most prominent stake. ARK Investment Management owned 6.09 million shares of the company worth $281.7 million.
Roblox Corporation (NYSE:RBLX) was on a downward spiral since the boom of 229% increased booking trends in 2020 due to the COVID-19 pandemic. However, the company had already been expecting a decline in bookings for several quarters and then a turnaround from May to June 2022. On May 10, Roblox Corporation (NYSE:RBLX) announced its first-quarter 2022 results, which were disappointing and the stock fell by 10%. However, the company closed at a 3.4% increase the very next day.
On May 12, Needham analyst Bernie McTernan lowered the price target of Roblox Corporation (NYSE:RBLX) from $60 to $40. Nonetheless, the analyst kept a Buy rating on the company stocks. Similarly, Deutsche Bank analyst Benjamin Black also kept a Buy rating on the company’s stock with a price target of $45.
Roblox Corporation (NYSE:RBLX) was mentioned by Tao Value in their fourth-quarter 2021 investor letter. Here is what it said:
“Roblox (RBLX) got significant more attention from both institutional & retail investors after Facebook announced to rename itself as Meta Platforms. I believe the price appreciation is largely attributed to the increased attention. On business side, Roblox rolled out a few successful music events and also partnered with Netflix on testing long-form media consumption in virtual world. Apple in its iOS 14.5 rolled out an impactful change for digital advertising landscape by requiring all apps to ask users to “opt in”.”
9. Unity Software Inc. (NYSE:U)
Number of Hedge Funds: 36
Unity Software Inc. (NYSE:U) is a California-based software development company. After facing constant losses since 2004, the company went public in 2020 and has been surpassing expectations since then. On September 17, 2020, Unity Software Inc. (NYSE:U) raised $1.3 billion after completing its IPO. The company was then valued at $13.6 billion. Apart from being a VR gaming platform, Unity Software Inc. (NYSE:U) also offers VR courses at Udemy.
Unity Software Inc. (NYSE:U) was beating its EPS and revenue forecasts in the previous four quarters. However, in the first quarter of 2022, the company reported an EPS of $0.08, which was in line with the analysts’ estimates. Additionally, the company generated a revenue of $320.13 million in the same quarter, missing the estimates by $1.02 million. Moreover, Unity Software Inc. (NYSE:U) reported a dollar-based net expansion rate of 135%. The DBNER of more than 100% indicates an increase in customer spending for the company.
The hedge fund sentiment for Unity Software Inc. (NYSE:U) remained the same through the third and fourth quarters of 2021. Out of 924 hedge funds tracked by Insider Monkey, 36 hedge funds had stakes in the company in both quarters of 2021. On May 12, Cathie Wood’s ARK Investment Management bought 331,600 shares of Unity Software Inc. (NYSE:U).
ClearBridge Investments mentioned Unity Software Inc. (NYSE:U) in its first-quarter 2022 investor letter. Here are the contents of the letter:
“We took advantage of a correction in higher-multiple stocks early in the first quarter to purchase shares of Unity Software (NYSE:U), a leading platform to create, run and monetize 3D content. With about 1.6 million monthly active creators versus roughly 15 million potential content creators in gaming alone, we believe the company’s Create Engine is still underpenetrated relative to its core addressable market. We similarly see a long runway for growth in Unity’s Operate Solutions segment given its advertising network commands single-digit share of the $60 billion mobile app install ad market today. Furthermore, we believe Unity is well-positioned to expand its addressable market to include industries beyond gaming, on both the operate and create sides of their business (Exhibit 1). The company is not yet free cash flow positive but given strong net expansion rates and high gross margins, we see a path to improving profitability over time, with management notably targeting positive free cash flow this fiscal year.”
8. Sony Group Corporation (NYSE:SONY)
Number of Hedge Funds: 28
Sony Group Corporation (NYSE:SONY) is a Japanese multinational, multi-industry company. It is the world’s largest video game publisher and is also the largest video game console company. The company started its virtual reality project in 2014 and named it Project Morpheus. Later on, the project was renamed Playstation VR. It was released in October 2016.
According to the fourth-quarter 2021 reports, Sony Group Corporation (NYSE:SONY) had an EPS of $0.77, which was 67% higher than the fourth-quarter 2020 EPS. On the other hand, the company missed its revenue estimates by $1.13 billion after generating $17.36 billion.
Out of the 924 hedge funds tracked by Insider Monkey, 28 of them had stakes in Sony Group Corporation (NYSE:SONY) in the fourth quarter of 2021. This number was up from 19 in the previous quarter. Mario Gabelli’s GAMCO Investors had the most significant stake in the company in the fourth quarter, with 1.8 million shares worth $233.46 million.
Here is what Cooper Investors had to say about Sony Group Corporation (NYSE:SONY) in their fourth-quarter 2021 investor letter:
“In recent years we have observed a growing market for music rights which represent another way for owners of record labels and music libraries like portfolio holdings Warner Music Group and Sony (via its subsidiary Sony Music, ~25% of our estimated enterprise value) to deploy capital, grow their businesses and create value for shareholders.
“In the first few days of 2022 Warner closed a deal to acquire David Bowie’s back catalogue for about US$250m which follows on from Bruce Springsteen’s catalogue sale to Sony for upwards of US$500m and Bob Dylan’s sale to Universal Music for a similar amount.
The trend in demand for music copyrights is clearly strengthening, with competition for these assets coming from traditional music companies (Warner, Sony) as well as specialist investors and private equity…” (Click here to see the full text)
7. Intel Corporation (NASDAQ:INTC)
Number of Hedge Funds: 72
By revenue, Intel Corporation (NASDAQ:INTC) is the largest semiconductor chip manufacturer in the world. Since the advent of mainstream virtual reality systems, the company hasn’t lagged in any way. Intel Corporation (NASDAQ:INTC) has been making VR-ready PCs for the past few years. Apart from gaming, the company has also launched Intel Xeon processors to help create commercial VR applications for retail, architecture, and medical education, among others.
Intel Corporation (NASDAQ:INTC) beat its EPS and revenue estimates by 175.62% and 0.16% respectively in the first quarter of 2022. The company reported an EPS of $1.98, compared to $0.72 forecasts. Moreover, the company generated $18.35 billion in revenue, which was $29.36 million more than the estimates.
In the fourth quarter of 2021, the hedge fund sentiment for Intel Corporation (NASDAQ:INTC) remained positive. According to the Insider Monkey database, 72 hedge funds held stakes in the company. The largest stake was owned by Baupost Group, with 18 million shares worth $928.9 million, comprising 9% of the fund’s total portfolio.
ClearBridge Investments mentioned Intel Corporation (NASDAQ:INTC) in their “Dividend Strategy” first-quarter 2022 investor letter. Here is what it says about the company:
“In the early days of the invasion, we made two measured changes to the portfolio based on longer-term fallout we anticipate from Russia’s invasion of Ukraine. We initiated a position in Intel (NASDAQ:INTC).
Over the last year, Pat Gelsinger, Intel’s new CEO, has devised a bold and aggressive strategy shift for the company. Gelsinger wants to open Intel’s factories to manufacture chips for competitors and thereby increase the utilization of Intel’s machinery. Doing so could increase the company’s returns and profits and bolster its competitive moat. While we admired these moves and saw their potential merit, we sat on the sidelines.
Intel’s repositioning requires tens of billions of dollars of increased investment and entails more risk than we are usually comfortable with. Russia’s invasion of Ukraine, however, changed our calculus. It revealed the fragility of the international order and drove home the importance of local manufacturing for critical industries like semiconductors.
Over several decades Taiwan has become the leading source for cutting-edge computer chips. With China determined to control Taiwan, this poses a critical strategic risk for the U.S. and the West. Concern over this threat has simmered for years but the war in Ukraine marks a boiling point. Indeed, just two weeks after Russia invaded Ukraine, Germany offered Intel over €5 billion in subsidies to build a plant in-country. We expect the U.S. will soon do the same. As Intel embarks on this new course, there is significant, long-term upside potential for the shares. This strategy entails meaningful risks, but at the $45 price we paid for our shares, we believe the risk/reward was asymmetrically skewed in our favor.”
6. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Funds: 75
Among other big companies, QUALCOMM Incorporated (NASDAQ:QCOM) has also joined the race for virtual reality programs with Snapdragon VR820. In the first three months of 2022, QUALCOMM Incorporated (NASDAQ:QCOM) reported a 35% YoY revenue increase, reaching $21.6 billion. Moreover, the net income of the company was reported to be 50% higher than the last year at $6.3 billion.
On May 5, QUALCOMM Incorporated (NASDAQ:QCOM)’s price target was raised by Tigress Financial analyst Ivan Feinseth to $238 from $195 with a Buy rating on the company shares. According to the analyst, the company remains well-positioned to benefit from “key secular communication trends”.
QUALCOMM Incorporated (NASDAQ:QCOM), Microsoft Corporation (NASDAQ:MSFT), Meta Platforms, Inc. (NASDAQ:FB), and Sony Group Corporation (NYSE:SONY) are some of the notable virtual reality stocks to consider.
Here is what ClearBridge Investments had to say about QUALCOMM Incorporated (NASDAQ:QCOM) in their fourth-quarter 2021 investor letter:
“Market strength continued in the fourth quarter, with only the communication services sector down in the Russell 1000 Value Index. Portfolio returns benefited from the strong performance of semiconductor maker Qualcomm, which has executed exceptionally well in pursuing the transition to 5G, growing both content and share due to its leadership position in cellular technology. The chipmaker recently outlined a number of peripheral growth opportunities outside of mobile markets, including automotive (where it hopes to leverage its strong presence in the automotive infotainment space into advanced driver assistance systems), Internet of Things (including opportunities in the PC market, VR/AR market, and factory automation) and radio frequency (where mmWave adoption globally, including China, would drive substantial upside).”
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Disclosure: None. 11 Best Virtual Reality Stocks to Buy is originally published on Insider Monkey.
