Virtual reality (VR) isn't new. The idea of immersing oneself in a virtual world has been around much longer than the buzzword "metaverse." However, the investment options are much more plentiful than they used to be. It seems more and more companies are finding ways to become players in VR.
So how does an investor decide where to allocate funds to capitalize on this trend? One way would be to put together a basket of stocks that combine large and established companies looking to capitalize on this trend with some newer businesses that bring some high upside potential but also increased risk. Here are three suggestions for this VR basket.
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Apple: Are VR goggles their next big product release?
We're starting with a rumor -- one that's been around for a while. Will Apple (AAPL -0.60%) announce VR glasses or goggles? No one knows for sure, but there's no shortage of reports that some version of an augmented or VR product will eventually be unveiled. Investors shouldn't invest in a company based solely on a rumor, but Apple is still a compelling choice even in the absence of a product on the market.
Even though there's currently no dedicated VR device in Apple's product line, the company is no stranger to this space. In 2017, Apple's iPhone first included augmented reality (AR) capabilities. Like other iPhone features, the AR function has become more robust with each new phone release. It's not difficult to see how this feature was the first step to a future AR/VR-dedicated device. If history is any guide, this potential device could rapidly become the next big hardware product in the Apple ecosystem, following in the footsteps of the segment-leading Apple Watch.
Microsoft: A recent acquisition gives its VR plans a boost
When Microsoft (MSFT 1.44%) recently announced its plan to acquire video-gaming studio Activision Blizzard (ATVI), it was clear that gaming would play a key part in the future success of the company. Already an industry leader with its Xbox console and Minecraft franchise, Microsoft sees this acquisition as a way to shape what comes next in gaming, particularly as it relates to the metaverse.
With popular titles like Halo and World of Warcraft joining the likes of Minecraft, it's easy to see how fully immersive virtual experiences could be the next step. Microsoft already has VR goggles on sale and several compatible games. A merging of VR technology and these soon-to-be-acquired game franchises would put Microsoft front and center as a leader in VR.
Roblox: Building a virtual world for its users
Roblox (RBLX 2.87%) is a popular gaming platform with 50 million daily active users, approximately half of which are 13 years of age and younger. Within the platform are games built around a virtual world where users can interact with one another and spend Roblox's digital currency, Robux. These virtual transactions are where Roblox makes most of its revenue and are vital to its success as a business.
To attract older users while keeping current users engaged, Roblox has been coming to agreements with brands and hosting events and experiences within the platform. In 2021, Roblox launched partnerships with 12 brands, hoping they will ultimately be monetized.
Roblox also hosted six music events last year. These efforts are paying off as the number of experiences in which the majority of users are 13 and older are increasing in prominence. These "aged-up" events accounted for 40% of the top 1,000 experiences in fourth-quarter 2021, compared to 28% in the previous quarter.
Bottom line for investors
Each of these companies brings with it both promise and risk.
Apple and Microsoft are well-established, large-cap companies that will be fine no matter how their VR efforts play out. On the flip side, there's also a chance that each could find itself benefiting from the potential growth in the popularity of VR. On the other hand, Roblox is completely built around VR and doesn't have other segments of its business to fall back on. Even though it's new to the public markets, it has been around for 16 years and is no stranger to this space.
All three of these companies are compelling investments for investors who believe in the long-term success of VR.
