A theme that has caught the attention of the investing and business world the last few months has been the metaverse, defined as immersive and interactive virtual online environments. Companies of all sizes are spending billions of dollars to try and capture this potential next wave of the internet. This includes Meta Platforms (META -2.77%), the parent company of Facebook, Oculus, Instagram, and WhatsApp. The technology giant is planning to spend $10 billion-plus each year on metaverse investments.
But Meta isn't the only company working on the metaverse. Here are three metaverse stocks to buy right now to ride this long-term trend.
1. Match Group
Match Group (MTCH -1.01%) dominates the online dating industry. It owns multiple applications and services, but its most important is Tinder, the top-grossing mobile dating app worldwide. Currently, the company makes most of its money through offering subscription or a la carte purchases, so users receive enhanced features and get their dating profiles in front of more potential mates. For example, in its latest quarter, Match Group's paying users grew 16% year over year to 16.3 million, which means that across all of its services, there were 16.3 million people spending money with the company.
This strategy has worked wonderfully so far and should provide solid growth for the company over the next few years. However, Match Group has ambitions to make its services even more immersive over the next decade and outlined its vision in its latest shareholder letter. This will start with video features, which Match Group has already added to a lot of its services. Within Tinder, it just launched an "explore" page where users can socialize with each other based on shared activities or hobbies. It plans to launch a virtual currency worldwide to make it easier for users to buy virtual goods and services on the platform.
Outside of Tinder, Match Group's most ambitious investment is Single Town, which is being run by its recent acquisition Hyperconnect in South Korea. Single Town is an experimental virtual world where singles can come together and talk/hang out using avatars in a virtual world. The idea is novel and may fail to gain traction, but it shows Match Group's focus is on improving the services it owns.
2. Take-Two Interactive
Take-Two Interactive (TTWO -2.53%) is a video game publisher behind hit games like Grand Theft Auto (GTA), Red Dead Redemption, and NBA 2K. Its main revenue driver is GTA, which is the company's most metaverse-like franchise. To give some context, the last new premium GTA game that Take-Two published is GTA V, released in 2013. It was the most popular game last decade and has been a huge growth driver for the company even in recent years.
How is this possible? Along with the release of GTA V, Take-Two released GTA Online to customers. GTA Online is a virtual world based in the fictional city of San Andreas in Southern California. Ever since its release, Take-Two has put out consistent updates and expansions for the GTA Online community, and these have driven spending on items and services within its virtual economy. While not as immersive as virtual reality headsets (at least, not yet), GTA Online is likely the best example of a living metaverse functioning right now.
GTA Online will release as a stand-alone game in March of 2022, which will hopefully expand the potential number of people interacting within the virtual world. The eventual release of GTA VI, whenever that may be, will likely drive even more recurring engagement within the GTA Online world. As the virtual world gets more and more immersive in the coming decade, you can bet GTA Online will as well, which will hopefully benefit any shareholders of Take-Two Interactive along with it.
Roblox (RBLX -6.51%) is another metaverse stock, but it "flips the script" compared to companies like Match Group and Take-Two Interactive. Instead of building its own metaverse-like experiences, Roblox offers the tools so other teams of developers can build their own virtual experiences for consumers. Think of it as YouTube for video games and virtual world development.
The experiences on the Roblox platform are mainly for kids right now, with the majority of its user base under the age of 18. But over time, the company thinks it can improve the tools it has for graphics development to make its games more on par with what professional studios like Take-Two publish. Roblox is already a huge online community with 47.3 million daily active users (DAUs) at the end of the third quarter. These users are spending madly on Robux, the platform's in-game currency that developers can sell to offer experiences or items for their games. (Roblox makes money by taking a cut of every transaction.)
In Q3, Roblox's net bookings (its sales metric) hit $637.8 million, leading to free cash flow generation of $170.6 million in the period. As previously noted, the platform is mainly for kids right now, but Roblox is building one of the most pure-play metaverse platforms in the world. If you think the trend of more immersive and virtual worlds will continue in the coming decades, Roblox could be a great long-term compounder for your portfolio.