Virtual reality has shifted from sci-fi speculation to real-world tech. But is there a viable industry beneath the hype? Australian investors may need to be patient if they plan on investing in virtual reality stocks.
What is virtual reality?
Virtual reality (VR) is a computer-generated experience that allows users to interact with a simulated 3D environment. People typically access this environment with the help of a VR headset, or head-mounted display, like the Oculus Quest, PlayStation VR or Microsoft HoloLens. Virtual content can also be projected onto room-sized screens, but wearable technology is far more popular and accessible.
Virtual reality is an emerging technology with the potential for widespread popularity and adoption. Many of us got our first taste of VR watching 3D films. But today, virtual reality has expanded into video games, training simulators, real-estate tours, online retail, architectural design and more.
Virtual reality stocks are from companies that design or produce VR software and hardware. Most of the big names in virtual reality are tech companies with budgets big enough to support a VR program — think Google, Microsoft and Sony. These companies don’t exclusively focus on virtual reality but have the resources and capital to devote to a VR program.
Virtual reality vs. augmented reality
Spend any time digging into the technology behind virtual reality and you’ll invariably stumble across augmented reality (AR). Like virtual reality, augmented reality also tweaks our interpretation of the world around us. But instead of immersing the user in a simulated environment, augmented reality simulates an artificial object in real space.
Augmented reality requires a screen to superimpose its artificial object onto what we observe. One of the better-known examples of this technology is utilized by the mobile game, Pokemon Go. Users open the game on their phone and use the camera built into their device to observe the world around them — with a simulated image of a Pokemon thrown into the mix.
Why invest in VR stocks?
Virtual reality represents a shift in how we interact with technology and our environment — and it’s gaining traction. After Facebook dropped $US2 billion on Occulus Rift in 2014, a number of other tech giants decided to make a play for VR tech, including Amazon, Apple, Intel and Google.
The market is poised for growth and the tech giants are in the game, many having taken big steps to flesh out their VR programs. A lineup of consumer headsets hit the market in 2016 and since then, apps, content and hardware continue to expand.
Beyond the potential for growth, Australian investors may be interested in the VR market for its growing list of practical applications. This is an opportunity to back technology you may actually use and benefit from — now and in the future.
Risks of investing in VR stocks
Virtual reality is becoming increasingly popular but there are investment risks to consider, including slow industry growth and the technology’s novelty status.
When Zuckerberg splashed big cash on Occulus Rift, he made a prediction about the potential of the VR market. And that investment hasn’t quite paid off — at least not yet. The industry is growing, that much is clear. But how long will it take to become truly profitable?
Experts anticipated that VR headsets would be all the rage when they first hit shelves. But for the most part, sales fell flat. The high price tag could have something to do with it — the Occulus Rift costs $US399 and the Vive Cosmos retails for $US699. Granted, there are cheaper options on the market, but as it stands, consumers need to be prepared for a hefty price tag if they want a high-quality VR experience.
The reality is, consumer spending is a huge slice of the VR market and in many cases, this technology is still seen as a novelty. Australian investors interested in VR stocks will need to be prepared to sit tight — for a number of years, potentially — while virtual reality evolves from novelty to necessity.
Virtual reality stocks
There are few pure-play virtual reality stocks — that is to say, there are few companies that focus on virtual reality technology and nothing else. To add VR technology to your portfolio, be prepared to invest in technology companies that do more than VR.
Company summary
Vection Technologies Limited, an enterprise-focused company, that helps businesses in bridging the physical and digital worlds in Australia. The company operates in two segments, IT and Outsourced Services. It offers Mindesk, a virtual reality design review and real-time rendering in the unreal engine, for CAD and BIM; EnWorks, a solution to support training, manufacturing, and maintenance processes that enhances the work with augmented reality-powered visual assistance; 3DFrame, a no-code enterprise metaverse app for immersive product presentations; configuration that manages product variations for ecommerce, from web to mobile devices; and XRKiosk, which transforms the in-store customer experience with 3D and augmented reality. It serves machinery manufacturing, automotive, naval, furniture, public sector, healthcare and pharma, betting, defence, military and law enforcement, aerospace, architecture, engineering and construction, sports, media and communications, retail, fashion, and education industries for design review, training, remote presentations, retail 3D experience, and 3D e-commerce applications. The company was formerly known as ServTech Global Holdings Limited and changed its name to Vection Technologies Limited in November 2019. Vection Technologies Limited was incorporated in 2016 and is based in Osborne Park, Australia.
Historical performance
Company summary
ELMO Software Limited provides software-as-a-service, cloud-based human resource (HR), payroll, and expense management solutions in Australia, New Zealand, the United Kingdom, and internationally. It operates in two segments, Small Business Solution and Mid-Market Solution. The company develops, sells, and implements various modular software applications to manage HR, payroll, and expense management related processes, including recruitment, onboarding, performance management, learning management, rewards and recognition, experience, course builder, pre-built courses, video library, remuneration, predictive people analytics, succession management, and rostering/time and attendance. It also provides HR Core for people management, and employee and manager self-service; Hybrid Work, a tool to manage capacity restrictions and make scheduling for teams across the organization; Wellbeing that offers employees with health and wellbeing resources; and HR Survey to conduct and manage staff surveys. The company was incorporated in 2002 and is based in Sydney, Australia. As of February 23, 2023, ELMO Software Limited was taken private.
Historical performance
Stock information
Market capitalization: $483410528
Dividend yield: 0%
Company summary
Nitro Software Limited operates as a document productivity software company in Australia and internationally. The company offers Nitro Productivity platform that provides portable document format productivity, unlimited eSignatures, and industry leading analytics, as well as document workflow management software. Its solution allows knowledge workers to productively manage and process documents for various functions, including editing, collaboration, storage, and electronic signing. The company also provides support services. It offers solutions to real estate, healthcare, manufacturing, energy, financial services, professional services, education, and insurance industries. Nitro Software Limited was incorporated in 1997 and is headquartered in San Francisco, California.
Historical performance
Stock information
Market capitalization: $559514368
Dividend yield: 0%
What ETFs track the virtual reality category?
Most of the ETFs that offer exposure to virtual reality stocks are based in the US, but here are some ETFs that track software and robotics companies.
BetaShares Asia Technology Tigers ETF (ASIA)
BetaShares S&P/ASX Australian Technology ETF (ATEC)
ETFS Morningstar Global Technology ETF (TECH)
How to buy virtual reality stocks
Eager to invest in virtual reality from Australia? Here's a quick breakdown of the investment process.
1. Research stocks
There aren't many pure-play VR stocks on the market, which means the first step in your research will involve identifying those tech companies with virtual reality programs.
When sizing up prospective VR stocks, take a look at the company's history. Startups have growth potential but can be volatile. Established companies offer more security but many are pricey to purchase.
You'll also want to make sure you understand what the company does and what its plans are for its VR program. Taking time to research the company you're interested in will help you make informed, targeted investment decisions.
2. Open a brokerage account
Next, you'll want to open a brokerage account in Australia. There are plenty of online brokerages to choose from, but no two platforms are the same.
If you're new to trading, explore the offerings of beginner-friendly brokerages, like eToro. If you've got some investment experience under your belt, opt for a platform with more extensive research tools, like Interactive Brokers.
3. Purchase stocks
After opening and funding your brokerage account, you're ready to select and purchase stocks. Search for the stock by company name or ticker symbol. Once you've found the stock you want to buy, enter the number of shares you'd like to purchase and submit the order.
You can track the performance of your investments by logging into your brokerage account.
Virtual reality market projections
The VR market was worth $US6.1 billion in 2020 and this figure is expected to rise to $US20.9 billion by 2025, reports Market and Markets. Over this period, the industry's anticipated compound annual growth rate (CAGR) is 27.9%, with the Asia Pacific market representing the largest portion of growth.
In the coming years, the biggest driver for the market will be gaming and entertainment-related head-mounted displays, which have a forecasted CAGR of 38.6% from 2020 to 2025.
Compare trading platforms
Before you can purchase VR stocks, you'll need a brokerage account in Australia. Explore your options below.
Important: The standard brokerage fee displayed is the trade cost for new customers to purchase $1,000 of either Australian or US shares. Where a platform charges different fees for both US and Australian shares we show the lower of the two. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.
Bottom line
VR stocks represent an enticing investment opportunity, bolstered by a market on an upward trajectory and expanding the technology’s everyday applications. But while experts agree that virtual reality will continue to reach into our everyday lives, the process may take some time.
Shannon Terrell is a writer for Finder who studied communications and English literature at the University of Toronto. On any given day, you can find her researching everything from equine financing and business loans to student debt refinancing and how to start a trust. She loves hot coffee, the smell of fresh books and discovering new ways to save her pennies.
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