Technology research and consulting firm Gartner thinks that technology goes through a "hype cycle" with five phases. A breakthrough triggers interest, then massive hype leads to inflated expectations that eventually reach a peak. Then there's a "trough of disillusionment," where interest wanes.
After that is a "slope of enlightenment," where the technology gains adoption. Finally, the technology takes off in a big way and gains broad market acceptance.
We appear to be in the "trough of disillusionment phase" with the metaverse. After the initial burst of investor interest, the enthusiasm level plunged. But if Gartner's hype cycle plays out, the outlook for companies poised to be metaverse leaders should improve.
That could happen quite soon. Here's an unstoppable metaverse stock that could double in 2023.
Down but not out
Matterport (MTTR -4.17%) captured a lot of attention a couple of years ago by going public through a merger with special purpose acquisition company (SPAC) Gores Holdings VI. It started off with a bang, as the stock tripled by the end of November 2021.
But the disillusionment soon set in, and Matterport (MTTR -4.17%) doesn't look unstoppable right now. The stock sank like a brick over the last 12 months, plunging more than 85%. It's down more than 90% below its all-time high.
However, Matterport's business remains strong. The company is the leader in creating digital twins of buildings and physical spaces. It has 8.7 million spaces under management, which is roughly 100 times more than the rest of the market combined.
Global consulting firm McKinsey thinks that digital twins are the "foundation of the enterprise metaverse." This enterprise metaverse enables companies to simulate their physical operations to design new products and help make better decisions. McKinsey even anticipates that the enterprise metaverse could make as great of an impact as the more publicized consumer metaverse.
How Matterport could double
Seven analysts who cover the stock were surveyed by Refinitiv, and the average price target for Matterport represented an upside potential of nearly 130%. Granted, there's some disagreement on Wall Street. Four of the analysts view Matterport as a buy, while three recommend holding the stock.
How could Matterport double over the next 12 months? Providing services for creating digital twins of customers' physical spaces is an important part of the path to success. The company's services revenue more than tripled year over year in the third quarter of 2022 to $10 million.
But subscriptions present an even greater opportunity. Matterport currently has around 657,000 subscribers in 177 countries. These include 23% of the Fortune 100 companies. Subscription revenue jumped 21% year over year in Q3 to nearly $19 million.
Matterport could boost its subscription revenue significantly by converting more subscribers to paying customers. Over 93% of the company's total subscribers right now don't pay anything.
Arguably, the most straightforward way for the stock to double, though, is for Matterport to gain additional market share. Less than 0.1% of the estimated 20 billion physical spaces in the world have been captured digitally.
What could get in the way
It could be difficult for Matterport to double this year if the overall market continues to flounder. Investors are unlikely to return to growth stocks en masse in such an environment.
On a related note, the potential for a recession could hold Matterport stock back. Larger companies could especially be slower to ramp up their digital-twins projects in the face of a significant economic downturn.
However, it's still quite possible that a bull market could be on the way in 2023. If so, Matterport is likely to be one of the metaverse stocks that mount a huge comeback.
