Metaverse stocks are on sale now; should you buy?
Key stocks including Meta, Nvidia and Roblox have lost billions in market cap in the past few months. Are they buys now for their long-term potential?
The concept of a virtual world called the metaverse dates back to the 1990s. But it was the name change of Facebook's parent company to Meta last fall that peaked investor interest in this digital world.
Despite the metaverse getting momentum throughout the technology and blockchain sectors, Meta stock has fallen sharply. Its share price peaked in September 2021 at US$384, but it's now down 47% at US$200 per share.
Other key Metaverse names have also fallen, as the market pulled back from growth stocks in general amid inflation and expected interest rate hikes.
But if the metaverse is coming, this might be a good time to buy into the fallen leaders. Here's a look at three: Meta, Nvidia and Roblox.
Meta lost half a billion in market cap, here's why
One of the main reasons Meta stock has underperformed — aside from the bear market in the tech sector — is strong competition from TikTok, which makes attracting younger generations a challenge for Facebook right now. Other reasons are Apple iOS changes and regulations in Europe, both of which have made it difficult for Facebook to offer personalized ads.
On the positive side, though, the company believes in its goal and is buying back stock, typically a good sign. It bought back a record of US$19 billion in the fourth quarter last year and a total of US$44.5 billion during the entire year of 2021. And that's when the share price was at its highest. With the recent drop in price, it may be a bargain.
For more details about the company, see our dedicated guide.
Nvidia is down 31% from all-time highs
Nvidia is one of the leading graphics card manufacturers and one of the forerunners for the whole metaverse concept. Its hardware is expected to be a key to bringing the digital world to life on computer screens and virtual reality headsets. Similar to other tech stocks, though, Nvidia had a rough few months, down from US$346 per share in November 2021 to US$229 in March 2022.
The main culprit is the failure to acquire UK's chip-design company Arm. Despite that, Nvidia had a record 2021 in terms of GPU sales and it frequently exceeds Wall Street sales and revenue numbers. This can make the company a bargain at these prices.
Learn more about Nvidia in our detailed guide.
Roblox dropped 68% from all-time highs
Roblox is another metaverse-related stock that saw its shares plummet. Since hitting all-time highs in November 2021 of US$141 per share, the stock is down US$42. That's lower than the IPO price of US$64.
Unlike other metaverse plays that are connected to the company Meta in one way or another, Roblox may act as a metaverse on its own. What's more, the platform already has 10 million people building on the platform, with around 219 million average monthly players, according to activeplayers.io.
Despite that, the company's growth has slowed down compared to previous years and the platform's metrics missed Wall Street analysts' expectations. One reason for that could be the pandemic winding down and children — which are the majority of the users — going back to school and resuming real-world interactions.
For more on the company's bottom line, see our detailed guide.
Is it a good time to invest in the metaverse?
This largely depends on your goals and risk appetite. The current bear market could continue and we could see more losses.
However, this could also be a good opportunity to stack up on some of these companies while they're on discount, especially if you're convinced that the metaverse is the future.
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Kliment Dukovski doesn't own any shares of the companies mentioned in the article as of the publishing date.