The stock market correction has gotten ugly lately. What started with high-growth tech stocks has now escalated to include most companies amid deepening geopolitical tensions, rising inflation risks, and more.
While, an unfortunate market correction is also an opportunity for long-term investors to buy stocks in good companies in strong favorable winds. One way to do this is to invest in leading companies in the emerging metaverse. Let’s take a look at two companies that are likely winners in the virtual worlds of the metaverse.
Roblox (RBLX 11.66% )
Nowadays, having a conversation about the metaverse usually starts with Roblox. It is one of the first companies to foray into the metaverse and has been one of the most successful. Just ask any young person in the US, Europe, and other parts of the world about Roblox and they’ll give you an elaborate explanation of its platform and the popular games on it.
The popularity of the Roblox platform is also evident in its numbers. Daily Active Users (DAUs) more than tripled from 15.8 million in the first quarter of 2019 to 49.5 million in the fourth quarter of 2021. Likewise, bookings increased more than fivefold from $ 142 million to $. 770 million in the same period thanks to an increase in SADs and higher spending per user. Additionally, the company has generated positive operating cash flow in each of the past 12 quarters.
Roblox has had some great runs in the past. But can he continue to grow in the future? I think so. For starters, the metaverse is here to stay. Technologies such as virtual reality and augmented reality are becoming more mature. Improved supporting infrastructures such as 5G connectivity, high-performance chips and low-cost processing will help power the metaverse into the future.
Plus, big tech companies love it Meta platforms, Microsoft, And Alphabet they are investing heavily in this emerging sector. So it’s hard to imagine it won’t take off. Even JP Morgan expects the industry to create a trillion-dollar annual revenue stream.
As a leader, Roblox already has an advantage with around 50 million DAUs as of December 2021. Plus, it has a community of loyal developers who have grown with the company. By creating better games, these developers will help Roblox attract new users and keep existing ones. A growing user base, in turn, motivates game developers to invest even more in creating quality games.
Bottom line: I think Roblox can support its growing user base and innovative games. And with the development of the metaverse industry, the gaming company is well positioned to benefit from potential new use cases in areas such as education, e-commerce, advertising, and others. It’s not a company to lose if you want to ride the metaverse wave.
Unity Software is a game development platform that allows game creators to create and run interactive, real-time 2D and 3D content on almost any platform, including virtual reality and augmented reality devices.
While Unity provides a suite of tools, its most notable feature is its game engine. Think of it as game making software. With Unity’s game engine, developers can now create their games at low cost and with a short development cycle. Unity also allows developers to use their games on its platform through hosting, customer management and monetization.
Game developers are practically stuck in the Unity ecosystem, which makes it very difficult for them to switch providers. Even if they change, the other choice is Unreal Engine. This likely explains Unity’s high net retention rate of 140% in December 2021, up from 138% in 2020.
With a strong customer base within a limited market, Unity is well positioned as game developers move towards the metaverse. After all, developers are already familiar with Unity, which understands their needs. Unity just needs to support its innovation around these needs.
Additionally, Unity is leveraging its software capabilities to develop strategic partnerships with companies outside the gaming industry. For example, the software vendor has partnered with Hyundai Motor to improve the efficiency and productivity of the manufacturing process. It also worked with eBay so that sellers can offer customers a 360-degree interactive view of the items for sale.
In short, Unity has strategically positioned itself to thrive in the growing metaverse. And if investors have the opportunity to buy the falling stock (during a market crash, for example), they should take it.
This article represents the author’s opinion, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis, even one of our own, helps all of us think critically about investing and make decisions that help us become smarter, happier, and richer.