Investors in Matterport (MTTR -0.57%) have not been enjoying its stock performance in 2022 -- down 75%, thanks to the market's overall negativity about the tech sector. But shareholders got some relief when the company delivered its first-quarter report on May 10. The spatial data company's results were better than expected, with a smaller loss than forecast, among other bright spots, and investors gave the stock a thumbs-up. Let's take a closer look at Matterport's latest numbers and consider what could lie in store for this beaten-down tech stock in the long run.
Matterport's results contained several silver linings
Matterport enables its customers to create "digital twins" of physical objects and spaces in the real world with the help of devices such as 3D cameras, 360-degree cameras, and even smartphones, and use the data they gather in an array of valuable ways. The company serves industries such as architecture, engineering, construction, commercial real estate, and retail, among others.The company reported Q1 revenue of $28.5 million, an increase of just 6% year over year, while its non-GAAP net loss increased to $0.10 per share from $0.01 per share in the prior-year period.
However, Wall Street was looking for $24.5 million in revenue and a loss of $0.14 per share. But solid growth in the company's subscriber base and subscription revenue helped it beat expectations. Of course, there wasn't much to write home about when it came to Matterport's top- and bottom-line performances last quarter. However, some key metrics indicate that the company is setting itself up for stronger long-term growth.
Image source: Getty Images.
For instance, it finished the quarter with 562,000 subscribers, up 70% from the end of the prior-year period. The company's paid subscriber base increased 18% year over year to 58,000 at the end of Q1. While the paid subscriber base may still look small right now, it is worth noting that Matterport is converting more and more of its free subscribers to paying ones.
Even better, the robust growth in Matterport's subscriber base is leading to a nice increase in the company's subscription revenue. That figure rose 24% year over year in Q1 to $17.1 million, and accounted for 60% of its top line as compared to 51% in the year-ago quarter. In the report, management pointed out that revenue from its subscription business has increased by 2.3 times over the past eight quarters.
Matterport expects its subscription revenue growth to accelerate as the year progresses: Guidance points toward a 31% to 34% increase in 2022, to a range of $80 million to $82 million. The company expects to finish the year with total revenue of $130 million at the midpoint of its guidance range, which would equate to a 17% rise from 2021's revenue of $111 million.
More importantly, Matterport seems to be in a solid position to sustain its top-line growth over the long run, and analysts are expecting consistent improvements in the bottom line as well. For instance, the company's revenue is expected to grow by nearly 40% in 2023, while its bottom line could grow at a compound annual rate of 26% for the next five years.
Given the massive opportunity it is sitting on, it wouldn't be surprising to see Matterport clock such impressive growth.
This catalyst could drive terrific long-term growth
Matterport has already created a huge database of 7 million digital twins that cover 22 billion square feet of digitized space across 177 countries. This explains why Matterport's subscriber base has been increasing at a tremendous pace, and the company should be able to sustain its impressive momentum in the long run as the demand for digital twins booms.
Mordor Intelligence estimates that the global demand for digital twins could grow at an annualized pace of nearly 35% through 2027, with the market expected to generate $61 billion in revenue that year. Matterport is setting itself up to take advantage of this huge opportunity. And as the impressive growth in its subscriber base suggests, it won't be surprising to see it convert more of its free subscribers into paid ones as the adoption of digital twins increases.
All of this indicates that Matterport could turn out to be a healthy growth stock in the long run as the demand for its offerings gains critical mass. And with its shares trading at 12 times sales as compared to last year's price-to-sales ratio of 46, investors can get a good deal on Matterport stock right now.
