The metaverse is a digital realm that transcends our understanding of reality. In this three-dimensional universe, people immerse themselves in a virtual environment and connect with others in the digital world. The technology has captured the imagination of many tech companies that are striving to make the metaverse a reality.
Investing in metaverse stocks requires patience. Its development could take years before reaching its full potential. According to McKinsey, the metaverse has the potential to generate $5 trillion in value by 2030. Citigroup thinks the opportunity could be worth a staggering $13 trillion by the same year.
There are companies making strides in the space that could be at the forefront of the metaverse's massive opportunity. Here are three stocks you should consider buying today to take advantage of the huge potential of this industry.
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1. Meta Platforms
Meta Platforms (META 2.98%) has made a considerable commitment to the metaverse, rebranding its business from Facebook two years ago. It has poured billions of dollars into chasing the metaverse through its Reality Labs segment.
The company offers its Meta Quest virtual reality devices and software and metaverse-related content through the Meta Quest Store. It offers a platform for people to engage in virtual experiences, from gaming to fitness to entertainment.
The Reality Labs segment has been working on exciting technologies but has been a significant drag on earnings for Meta. Last year the segment lost $14 billion and another $4 billion in the first quarter.
Investing in the metaverse will require significant capital investment and may not be profitable for several years. However, Meta's Family of Apps, including Facebook, Instagram, and WhatsApp, provide significant cash flow. Last year, these segments showed a profit of $43 billion, along with another $11 billion in the first quarter.
Meta Platforms is committed to investing significantly in the metaverse, and its other businesses ensure it can continue to do so -- making it a solid metaverse stock to buy today.
2. Unity Software
Unity Software (U 0.92%) provides creators a platform to create 3D development tools, allowing them to create interactive 3D, augmented, and virtual reality experiences. It expects to play a significant role in expanding metaverse content in the coming years. The company estimates half of the world's mobile, console, and PC games are created with its game development engine.
It offers two products, Unity Personal and Unity Student, for free to content creators who are just getting started. The company generates revenue through subscriptions to its platform, support, and services, and connects advertisers with creators to monetize their content.
Last year, Unity's revenue of $1.4 billion grew 25% from the year before. However, the company has struggled to turn a profit and lost $919 million during the year. In the first quarter, revenue grew 56% from last year, but its net loss increased to $254 million.
Unity is in growth mode and is racking up losses as it faces near-term headwinds. The stock has a promising future as a key player in the metaverse and presents an attractive investment opportunity for those with a long time horizon. Its high valuation and lack of profits make it best suited for investors willing to wait out its near-term growing pains for potentially excellent long-term returns.
3. Apple
The final metaverse stock to buy is Apple (AAPL 0.64%). Analysts expect Apple to announce its virtual reality headset during its Worldwide Developers Conference, which will begin on June 5. If it does, this product would be a massive move for Apple to add to its already impressive line of products.
According to Gizmodo, Apple's VR headset would be very different than other offerings in the market today in terms of functionality, available apps, and price. The device would use mixed reality or a combination of augmented and virtual reality and is expected to cost around $3,000. The move would be significant for Apple, which is already a behemoth with its $2.7 trillion market capitalization.
Like Meta, Apple has several other highly profitable businesses that provide excellent cash flow, allowing it to invest in building VR and related apps. Apple is already a stellar company, and its potential role in shaping the metaverse with its products is another reason the stock is solid to buy and hold long term.
