It's no secret that Cathie Wood's ARK Invest funds like companies at the forefront of technology trends, and that's especially true of the firm's ARK Autonomous Technology & Robotics ETF (ARKQ 4.22%).
Wood is especially bullish on the metaverse, saying, "We're going to have our digital twins, and it's going to enable a lot of fun and efficiencies." We recently learned that the fund added a stake in spatial-data company Matterport (MTTR 6.75%) to its portfolio, buying over 530,000 shares on Monday, so here's an overview of what Matterport does, how it ties in with Ark's metaverse investment strategy, and how much potential this innovative business could have.
What does Matterport do?
Matterport is a spatial technology company. It develops technology that creates three-dimensional digital versions of physical spaces and maintains a massive data library of spaces throughout the world that have already been mapped using the company's platform. For an example of a consumer-facing application, Matterport's technology is used to make three-dimensional virtual home tours, featured on platforms like Redfin (NASDAQ: RDFN) and Vacasa (NASDAQ: VCSA).
The company makes money in a couple of ways. First, it sells its spatial-data capabilities to customers as a subscription model (with a lower-feature free version available as well). It also sells proprietary 3D mapping cameras, particularly the Matterport Pro2 camera, which retails for $3,395. The technology can be used with other hardware, including iPhone and Android devices, but Matterport's hardware allows anyone to create professional-quality mappings with ease.
Matterport's metaverse potential
Since Matterport essentially makes digital twins of physical spaces, it's easy to see where it fits into the metaverse. And beyond the current consumer-facing applications like home tours, there are many potential uses, such as for construction, interior design, property management, insurance underwriting, and more. And as Cathie Wood herself has said about metaverse technology, "It's a big idea that will probably infiltrate -- just like technology is, anyway -- every sector in ways that we cannot even imagine right now."
Given that last statement, it's tough to quantify Matterport's potential, but the traction so far has been impressive. The company has a data collection of more than 15 billion square feet of physical spaces mapped, 100 times more than the rest of the industry combined. It has more than 250,000 subscribers worldwide, and 13% of the Fortune 500 use Matterport (although some use the free version).
With that in mind, Matterport could be just scratching the surface of its potential. Fewer than 1% of the buildings around the world have been digitized by any company (including Matterport). The company estimates that if it can capture just 1% of its addressable opportunity, it could produce $2.4 billion in recurring subscription revenue. And as the business scales, Matterport's subscription revenue is likely to be at very high gross margins, which should ultimately translate into bottom-line profitability.
A small position, but will ARK buy even more?
For the time being, Matterport remains a relatively small investment for ARK, making up just 0.25% of the Autonomous Technology & Robotics ETF after Monday's purchases. For context, Tesla (NASDAQ: TSLA) is the fund's largest holding at 10.6% of assets, and the 10 largest holdings make up over half of its asset value.
However, it's also worth noting that Wood and her team tend to build positions over time, so it wouldn't be surprising to see Matterport become a more significant part of the fund in the weeks and months to come. For now, investors seem very excited about the move, and given Matterport's potential in the metaverse, it's not difficult to see why.