Metaverse stocks refers to companies that are focused in some way on the growing alternate reality and artificial intelligence space. The sector has gone quiet so far in 2022, mostly due to the fact that growth stocks typically suffer the most during periods of uncertainty in the market. However, I think now could be the right time to start allocating some of my money here. I’ll explain why!
Getting in at more reasonable valuations
I prefer to buy stocks when the price has fallen, rather than buying when the stock is soaring. Instead of piggybacking when metaverse stocks are rallying, I feel my return will be much higher buying before this potential move happens.
For example, take the largest metaverse player, Meta Platforms. The rebranded Facebook has experienced a share price slump of 56% over the past year. This has helped to reduce the price-to-earnings ratio to 13.35, half what it was a year ago. From my perspective, this means that I’m buying now at a better long-term value.
Another reason for thinking that the sector is the place to be right now comes from the continued growth in social media. As of July 2022, 59% of people use social media, with 227m new users in the past year. It shows that growth is still there. Not only this, but the average time spent on social media is a whopping 2 hours 29 minutes per day!
Since companies associated with the metaverse are often linked heavily to more traditional social platforms, leveraging this existing (and growing) user base should help the adoption of it going forward.
More adoption cases for metaverse stocks
A year ago, most of the concept of metaverse possibilities centred around gaming. Yet over the course of this year, more and more different adoption ideas are coming forward. Earlier this year, I remember seeing a Walmart video of virtual reality shopping in the supermarket, that then delivered the actual goods to you. Use cases for education have also developed in recent months, providing the potential to open up better remote learning facilities.
As more applications build, it’s only a matter of time until one hits the jackpot and goes viral and mainstream. At that point, metaverse shares could once again take off. Therefore, I want to get invested now in a selection of stocks in this sector to be ready.
Risks to be aware of
Despite all my positivity, I’m not going to pretend that this is a low risk area. The metaverse doesn’t have a high enough user base to be a strong source of profits for the companies involved. Even though I think it’s likely that this changes in coming years, I could be well ahead of my time.
The risk is that my money would be better invested elsewhere in more low risk areas in the meantime. Healthcare and finance are two examples that have a strong track record. If it takes a decade before the majority of the public use the metaverse in some form, I could be twiddling my thumbs for a long time.
