Investing in the metaverse is a rather nebulous concept. There's no official definition for what the metaverse is, other than a variety of virtual worlds where people can interact. 

During the pandemic, the value of such virtual spaces became clear. The market rewarded companies that shifted their focus to developing next-generation virtual experiences. That's not so much the case now. In fact, the market has punished some companies because of their ties to the metaverse.

However, I think there's a long-term investing thesis that can hold water for specific companies operating in this space. Here are three of my top picks for investors looking for metaverse stocks to buy during the next bull run.

1. Meta Platforms

Investors are finally regaining confidence in Meta Platforms (META 0.11%) stock. Indeed, 2022 was not a great year for investors in the company formerly known as Facebook. That's mainly due to bearish sentiment around the company's financial performance, as investors homed in on the company's incredible spending clip when it comes to the metaverse.

Meta's Reality Labs division burned more than $1 billion per month in 2022, losing $13.7 billion in 2022 alone. However, a slightly lower-than-expected operating loss of $4.3 billion last quarter, relative to expectations of a $4.4 billion loss, along with significant cost-cutting efforts, did lead the stock to surge following the company's earnings report.

With the stock still hovering around levels seen following the report, it appears the market is still trying to digest Meta's longer-term outlook.

On the cost front, where many investors are most concerned, Meta has signaled a more intense focus. The company announced a second round of layoffs this week, in a bid to assure investors that bottom-line performance will continue to be the focus, as Meta's so-called "year of efficiency" continues. The company has also reportedly moved to a flatter corporate model, asking many of its managers to "get back to making things or leave."

Free cash flow numbers will continue to be my primary focus with this stock. These cost-cutting efforts should accelerate growth on this front, which has been lagging. Meta's 2022 cash flow of $5.3 billion was decent compared with the $1.5 billion analysts expected, but it still declined nearly 60% from 2021 levels.

Given the relatively low bar Meta now has to jump over, should free cash flow growth accelerate in 2023 and 2024, this is a stock with plenty of room to appreciate in the years to come.

2. Nvidia

As the leader in the GPU market, Nvidia (NVDA 1.75%) plays a pivotal role in the metaverse industry. Its years of experience and state-of-the-art design abilities make it a dependable platform for developers to use as they construct new products, experiences, and services in the metaverse.

Nvidia's stock price has been on a tear thus far in 2023, surging in an almost linear fashion to start the year. This move probably represents a broader bullish take on Nvidia's growth prospects over the longer term, particularly in high-profile areas such as artificial intelligence (AI). 

That said, this is a highly diversified company with respect to the markets Nvidia serves. The company's high-end GPUs are foundational for a number of high-growth industries. AI is just one of many use cases for its technology. 

The company's previous significant declines in 2022 were generally tied to expectations of slowing growth in areas such as gaming, which implicitly includes the metaverse, and crypto mining. However, if investors turn bullish on high-tech growth stocks once again, it could be argued that any sort of bull run in the metaverse would be a similar catalyst as the recent surge in the valuation of AI-related companies this year.

Nvidia stock is one I view as a more indirect way to play a potential bull market rally among metaverse stocks. For investors seeking growth exposure, Nvidia's more diversified business model, and the fact the company serves so many unique industries with their own sets of secular tailwinds, could provide relative outperformance over the long run, even compared with the other two names on this list.

3. Roblox

Roblox (RBLX -1.18%) runs a metaverse gaming platform that allows users to construct and participate in games simultaneously. During the pandemic, the platform saw a surge in popularity as people sought improved social connections, which Roblox's virtual worlds provided through its metaverse environment. However, the growth rate has since stabilized, leading to a substantial decrease in the stock price of RBLX.

The company's focus has been expanding its target audience. During Roblox's Q3 earnings call, CEO David Baszucki noted, "It's worth mentioning that the growth in the 17- [to] 24-year-old demographic has consistently improved over the past three to four years, and this is due to our all-encompassing approach."

I think the company's recent stock price decline was probably warranted. Hindsight is a great thing, of course. However, the idea that Roblox's revenue could continue to grow at a nearly fourfold clip, as it did between Q4 2019 and Q4 2021, was wishful thinking. At these more reasonable valuations, any sort of surprise to the upside in terms of growth could reinvigorate the growth-investor crowd.

The metaverse is down, but not out

These metaverse stocks are probably poised for more volatility in 2023. It's hard to make the case that growth will materialize to the extent many investors had previously priced in during the most recent bull run. These stocks sold off as the market sought more appropriate valuation levels across the board.

However, should growth accelerate as these companies continue to invest in their innovative and disruptive technologies, it's entirely possible that these three metaverse stocks could be outperformers during the next bull market rally.