The idea of the metaverse is not new, despite what most people think. Neil Stephenson, a best-selling author, used the phrase for the first time in his science fiction book Snow Crash, which came out in 1992. The idea of a permanent 3D virtual world made possible by technologies like virtual reality (VR), augmented reality (AR), artificial intelligence (AI), and blockchain has, without a doubt, been getting more attention lately as more businesses try to make money off of it.
Even though there are rare exceptions, investors often choose to buy businesses like Roblox and Unity software that focuses on the metaverse over riskier investments. Let’s look at two safer stocks that offer investors good chances to make money from the growth of the metaverse. Even though these businesses are very profitable and bring in money, there is still a lot of room for growth in the Metaverse market.
Graphics processing units (GPUs) and system-on-a-chips (SoCs) made by NVIDIA (NVDA -8.19%) are used a lot for gaming and 3D simulation, mining cryptocurrency, and making other commercial applications, many of which will be used to build the Metaverse. The next NVIDIA Omniverse platform could also change everything about how we live. In essence, Omniverse is a place where people can work together to design things and simulate them in 3D in real-time. For example, the BMW Group used the platform to model and simulate an exact “digital twin” of a future auto plant to plan for it. Nvidia is one of the most promising metaverse businesses because of its hardware and the Omniverse platform.
In the first quarter of fiscal 2023, which ended on May 1, Nvidia’s total sales went up 46.4% year over year to $8.3 billion. The adjusted earnings per share went up by 49.5% to $36. Adjusted gross and operating margins went up by 90 basis points and 255 basis points, or 67.1% and 47.7%, respectively, which is good for making money. The software giant also made $1.4 billion in free cash flow during the quarter, bringing its total for the last 12 months to $7.9 billion. At the end of the quarter, Nvidia had cash and securities that could be sold for a total of $20,3 billion. Analysts on Wall Street predicted that the company would end the year with sales of $33.3 billion and profits of $5.34 per share, which is an increase of 23.9% and 20.3%, respectively.
These are really good growth rates, and Nvidia seems to think that the stock is a good buy right now, since shares are down 36% since the beginning of 2022 and the current price-to-earnings ratio of 50.9 is much lower than the 5-year moving average of 59.0.
This company is all about the change from the metaverse to the real world. This is clear from the fact that he changed his name from Facebook to meta platforms (META 3.32 percent). The Reality Labs division of the social media giant is in charge of making things like the Oculus Quest 2 headgear and other Metaverse platforms like Horizon Worlds. Meta spent $8.7 billion on research and development in the second quarter, which was 42.6% more than the same time last year. This was due to the company’s continued growth in this area. Reality Labs’ operational loss went from $2.4 billion in the same time period last year to $2.8 billion this quarter.
The company’s plans for the Metaverse will take a while to come to fruition, but investors shouldn’t worry. Last year, the social media giant made $35.8 billion in free cash flow and has $40.5 billion in cash and securities that can be sold. Also, the company’s main source of income, advertising, brought in $28.2 billion, or 98 percent of all revenue, for the quarter.
In the end, Meta has enough money to reach its goals for Metaverse, and it also gets a steady stream of cash from its premium advertising business, which it runs through its Facebook network. More than a third of the world’s people, or 2.9 billion people who use Facebook every month, do so now. Meta had been having a rough year on the stock market up until this point, just like Nvidia. Since the beginning of 2022, shares have dropped by about 50%. Because of this, the price-to-earnings ratio fell to a record low of 13.6, which is much lower than the average of 27.9 over the past five years.
Randi Zuckerberg is the sister of Mark Zuckerberg. She is the CEO of Meta Platforms and was the head of market development and a spokesperson for Facebook. She is also on the board of directors of The Motley Fool. Lukas Meindl does not own any of the shares shown. The Motley Fool owns shares in Roblox Corporation, Unity Software Inc., Meta Platforms, Inc., and Nvidia, but it tells people not to buy these stocks. The Motley Fool has a policy about telling the truth.