Share prices of Matterport (MTTR 0.85%) have kicked into a new gear since the beginning of May, rising 47% and crushing the Nasdaq-100 index's 18.4% returns by a handsome margin. The jump came after the release of solid first-quarter results. Matterport delivered impressive revenue growth during the quarter and also narrowed its non-GAAP (adjusted) net loss.
Investors might want to take a closer look at the reasons why this stock, which is currently trading for less than $4 a pop, is back in favor with Wall Street traders. There are indications that more upside is coming.
Matterport is scratching the surface of a huge end-market opportunity
Matterport is known for providing spatial data solutions -- such as digital twins -- that help in digitizing real-world objects. The company provides customers with a platform that allows them to turn "real-life spaces into immersive digital twin models." The company offers both software and hardware -- such as 360-degree cameras -- for capturing digital twins. It also provides a service in which customers can hire Matterport's professionals to transform their physical spaces into digital twins.
It is worth noting that the demand for digital twins is expected to explode over the next several years. Grand View Research estimates that the digital twin market could clock annual growth of 37% through the end of the decade, driven by their increasing adoption in the manufacturing, aerospace, and automotive markets. That's not surprising as digital twins -- which are accurate virtual replicas of a physical object -- can be used to study how the object could perform in the real world using various parameters to create simulations.
The research firm points out that the digital twin market could generate $155 billion in annual revenue in 2030. As Matterport has generated just over $145 million in revenue in the trailing 12 months, there's a massive opportunity for the company to increase its revenue substantially in the long run. The good part is that Matterport is already growing at a nice clip.
The company's revenue in the first quarter increased 33% year over year to $38 million, exceeding the higher end of its guidance range. Matterport enjoyed solid growth in the subscription, services, and product revenue streams last quarter, suggesting that the demand for its offerings remains healthy.
More specifically, Matterport's subscription revenue increased 16% year over year to $20 million, while services revenue increased at a stronger pace of 119% to $8.7 million. Meanwhile, the 28% year-over-year increase in the company's product revenue to $9.4 million in Q1 suggests that its cameras are in good demand as well.
It won't be surprising to see Matterport maintaining a healthy growth rate in the long run, as the company has built up a huge subscriber base already. It reported 771,000 subscribers at the end of Q1, a 37% increase over the year-ago period. The number of paid subscribers stood at 67,000, which means that it has a big pool of potential customers that could eventually buy a subscription and power its long-term growth.
Moreover, Matterport is looking to push the envelope within the digital twin market by integrating generative artificial intelligence (AI) tools into its offerings. Last month, the company announced the launch of the Genesis generative AI platform. This platform will allow customers within the real estate niche and architecture niche to create building and home designs, automate interior designing, gain insights into building maintenance and repairs, and reduce energy consumption, among other things, all with the help of simple user prompts.
With the adoption of generative AI in the construction market expected to grow at an annual pace of 35% over the next decade, such tools can help improve the demand for Matterport's solutions.
It isn't too late to buy Matterport stock
Matterport's 2023 guidance points toward 19% growth in the company's revenue at the midpoint to $162 million. Analysts are expecting the company's top line to jump another 16% in 2024 to $188 million.
However, the size of Matterport's end-market opportunity and the addition of emerging technology such as generative AI could help it spring a positive surprise and clock faster growth. It is worth noting that the company beat Wall Street's earnings expectations in each of the last four quarters, and it could sustain that streak in the future as well, given the catalysts discussed above.
Also, Matterport's sales multiple dropped significantly over the past year despite the growth in its top line.
MTTR Revenue (TTM) data by YCharts.
This indicates investors are getting a good deal on this hot growth stock right now, which they may not want to miss since it is capable of heading higher thanks to the company's impressive growth and substantial revenue growth opportunity.
