The metaverse has become an increasing focus within the tech sector for a good reason. Grand View Research estimates it will become a $679 billion market by 2030, with a compound annual growth rate (CAGR) of 39%!
This should benefit many metaverse stocks, particularly the ones that have developed a reputation for applications deemed both innovative and reliable by the marketplace. To this end, stocks such as Shopify (SHOP 0.29%) and Zoom Video Communications (ZM 0.25%) could turn into profitable avenues for metaverse-driven returns.
When investors think of Shopify, they may ponder its speed and features or perhaps its venture into fulfillment. However, they should also consider paying close attention to Shopify's metaverse applications.
Despite the popularity of e-commerce, buyers still cannot see a product from all angles. The metaverse can address this concern through Shopify AR, its augmented reality tool. Shopify AR enables merchants to create and store a 3D model of particular products.
Such models give prospective buyers an idea of a product's size, scale, and detail that photographs cannot necessarily convey. Thus, customers can more closely evaluate whether a product suits them, a benefit that will probably reduce returns.
Shopify reported $47 billion in gross merchandise volume in the second quarter of 2022, and this metric has grown at a CAGR of 50% over the last three years. Hence, reducing returns can translate into significant savings.
Shopify lost 80% of its market cap in the bear market. Still, it may have begun the road to recovery as it forecasts that new merchants will join its platform at a faster pace during the second half of the year. At the same time, it believes expense growth will slow. That accelerating growth, along with a price-to-sales (P/S) ratio near record lows of 10, could lead to its stock returning to all-time highs and beyond.
Zoom stock was an early pandemic darling. As lockdowns limited in-person meetings, people and businesses turned to its popular and affordable web conferencing platform in large numbers to interact.
Moreover, since many organizations discovered the value that online meetings add, Zoom has continued to drive growth despite the end of lockdowns. That functionality helped it claim 74% of the market, according to Datanyze. This is well above Cisco's Webex, which holds an 8% market share.
Zoom is also helping to take many of these meetings into the metaverse. Zoom Workrooms utilize Meta's Oculus VR goggles to mimic an in-person experience. Also, Zoom is currently testing an app called Welo, which allows for creating physical meeting spaces within the digital world. Such functionality can accommodate breakout sessions as one's avatar walks to a separate area with different people.
Additionally, these spaces can also integrate the Zoom Whiteboard. This means that participants can view one's visualization of a concept posted to a board in the same way.
In Zoom's first quarter of 2023, which ended April 30, revenue rose 12% year over year to almost $1.1 billion. This occurred as the number of enterprise customers grew 24% over that period to 199,000 during the quarter. That also includes over 2,900 customers who spend over $100,000 on the platform, a figure that grew by 46%.
Despite that growth, Zoom has fallen by over 80% from its fall 2020 high. However, its P/S ratio stands at about eight, a level not far above record lows and well under where it stood before the pandemic. As enterprises continue to utilize these metaverse applications, investors may again see Zoom as a top growth stock to buy now.