IInvesting in the metaverse has become a frenzy since Facebook, i.e. Meta-platforms (NASDAQ: FB) – decided to go further in the digital world and start spending billions a year for its development. Not only will powerful new companies likely be created if the metaverse takes off, but even more companies could benefit fully from the technology’s construction in the decades to come.
To that end, three Fool.com contributors have three metaverse actions to consider right now: Unity software (NYSE: U), Netflix (NASDAQ: NFLX), and Tencent (OTC: TCEHY). Here’s why.
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A “construction company” for the metaverse
Nicolas rossolillo (Unity software): Yes NVIDIA co-founder and CEO Jensen Huang Rightly, the “worlds” in the metaverse will be as numerous as the websites on the Internet are today. This makes sense, given that the Metaverse is just a virtual embodiment of information and experiences on the internet. Every business and organization, and even individuals, may one day be able to launch their own virtual spaces in the metaverse and connect them to the Internet at large.
But to get there, we will need tools that greatly facilitate the construction of such worlds (like Shopify and Wix.com are doing for website building today). Such a suite of creativity tools could come from Unity Software. Unity solutions for the creation, execution and monetization of 3D content have made a name for themselves in the video game industry, but they have extended far beyond that: by recruiting users in the fields of gaming. ‘engineering, manufacturing, education, live sports, etc.
The breadth of options available for expanding Unity is only limited by the imagination. Millions of creators around the world are already using Unity, and the content created using the platform could be limitless if the Metaverse turns out to be more than just a hot topic of the moment. But given the tens of billions of dollars invested in next-gen computing and web experiences, I think it’s a no-brainer that the latest iteration of the digital world is here to stay.
The recent metaverse buzz and a stellar third-quarter 2021 results update (revenue of $ 286 million was up 43% year-on-year; forecasts for the fourth quarter call for another increase of 29% to 32%) have blown up Unity stock lately. Shares are up 24% year-to-date, with all the advantage since Facebook rebranding as a meta-platform and Unity’s latest quarterly report.
Clearly, investors are excited about the potential of Unity Software’s metaverse. Has an expected report of enterprise value for a turnover of 52 for the current year, its share comes at a high price. But if you want to participate in the development of the virtual world at the start of the game, this is a great stock to check out.
Another good reason to own Netflix stocks
Anders Bylund (Netflix): No, it’s not a typo. To me, Netflix looks like a great way to invest in the metaverse. In fact, the media streaming veteran must have watched this drastic change come a mile away, actively investing in the next virtual reality revolution. He has been working on virtual reality experiences for quite some time.
I’m not talking about the basic Netflix app for the Oculus Quest headset. It’s just another way to see the same Netflix titles you would see on your phone, tablet, computer, set-top box, etc., wrapped up in a cozy 3D rendering of a living room somewhere in the Swiss Alps. It’s an aging, clunky experience that’s prone to sudden crashes, and it could really use a bugfix update some day soon.
We don’t watch the recent Squid game title for Oculus, either. It’s a fan-made game that attempts to replicate the “red light, green light” experience of the first episode of the namesake South Korean series. It’s not even available in the Oculus App Store, but must be downloaded from unofficial sources. Netflix was not involved in the development of this game, however. Chief Operating Officer (COO) Greg Peters doesn’t care that someone else took the time to do it.
And the metaverse’s effort goes far beyond the Eden unearthed game, although this one is a step in the right direction. Released for free in the Oculus App Lab portfolio as a work in progress, it is a Netflix supported game based on the original Netflix animated series. Eden. Eden unearthed isn’t much of a game, but it does offer intuitive controls and a dazzling VR view of the show’s fictional world.
So here is the real revelation. When Netflix hired its first head of video game operations four months ago, it got right to the heart of the metaverse project. The company’s vice president of game development is Mike Verdu, from Facebook’s augmented / virtual reality project two months before Meta Platforms’ official name change. Verdu may know something about Meta’s future plans for the Metaverse, and he’s now the driving force behind Newly launched Netflix video game services.
Netflix isn’t known for half-heartedly pursuing a growing market. The streaming service launched worldwide as investors expected a series of small steps with just a few new countries per mini-launch. When original content proved to be a winning strategy, the company began investing billions of dollars in film and show production, which now dominates Hollywood award season.
And a few modest mobile games might be cool, but what if Netflix really wants to develop immersive, story-based experiences inside the metaverse? Well, they just hired the guy to take them in that direction.
So yeah, I’m serious. Netflix is ââexpected to be a big winner in metaverse-based media content and immersive gaming experiences. Wait and see.
This tech giant has all the building blocks of the metaverse in hand
Billy Duberstein (Tencent Holdings): When you think of the metaverse, you might think of a supercharged social media platform. The mixture of virtual and physical worlds could obviously also apply to video games, taking them to another level of immersion. Nor would it be difficult to envision metaverse business applications, allowing colleagues to collaborate from different parts of the world.
You guessed it, Chinese internet giant Tencent’s two most profitable companies today are video games and social media, which positions them well enough to capitalize on any metaverse opportunity. Tencent is the nation’s largest distributor of games for mobile devices and personal computers (PCs). It owns a number of video game studios, including Epic Games, the company behind the immersive global success. Fortnite and the Unreal game engine platform, used by both Epic and other developers. Tencent is also the parent company of the social network and âsuper-appâ WeChat, which has more than 1.26 billion users and is central to the daily lives of many Chinese citizens.
Meanwhile, the company’s most recent growth focus has been on what it calls âthe industrial internet,â which is basically cloud-based enterprise software applications that could day also participate in the metaverse. Indeed, on the recent conference call with analysts, management said that some of its more widely adopted enterprise software products, such as WeCom, Tencent Meeting, and Tencent Documents, are not even monetized yet, but Tencent’s financial and business services segment still has increased by 30% year on year.
In a new twist, Tencent also just unveiled three semiconductor designs through artificial intelligence, video transcoding and networking. Other US-based tech giants have been developing their own proprietary chips in recent years, but this was a new milestone – or at least, an announced new milestone – for Tencent.
The company occupies a leading position in China not only in one, but in several potential use cases for the metaverse; a new interest in chip design; a story of innovation; and vast financial resources. When you consider all of this, Tencent looks very likely to be a formidable player in the metaverse, and potentially a world leader.
Meanwhile, regulatory crackdown in China has given investors the option to buy Tencent shares about 33% below all-time highs, even though Tencent is likely the company best equipped to survive this period of strong government intervention – and thrive on the other side.
10 stocks we prefer over Unity Software Inc.
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Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of the board of directors of The Motley Fool.
Anders Bylund owns shares of Netflix. Billy Duberstein owns shares of Meta Platforms and Netflix and has the following options: short January 2022 $ 195 sale on Meta Platforms. Its clients may own shares of the companies mentioned. Nicolas rossolillo owns shares of Meta Platforms, Nvidia, Shopify, Unity Software and Wix.com. Its clients may own shares of the companies mentioned.
The Motley Fool owns shares and recommends Meta Platforms, Netflix, Nvidia, Shopify, Tencent Holdings, Unity Software, and Wix.com. The Motley Fool recommends the following options: $ 1,140 long calls in January 2023 on Shopify and $ 1,160 short calls in January 2023 on Shopify. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.