The metaverse, a concept that once lived solely in the pages of science fiction, has quickly evolved into one of the most buzzworthy topics in the tech world. It’s essentially a virtual space where people can interact, play, work, and explore digital environments using technologies like augmented reality (AR), virtual reality (VR), and 3D graphics.
Given its potential to drive the next big opportunity in the tech space, several tech giants are heavily investing in this area to fuel their transition. In this article, we’ll delve into three fundamentally sound stocks: NVIDIA Corporation (NVDA), Meta Platforms, Inc. (META), and Autodesk, Inc. (ADSK), with explosive growth potential within the metaverse.
The metaverse isn’t just about gaming or social interactions. It encompasses immersive experiences that could redefine entertainment, education, and even the way we collaborate in virtual offices. As the metaverse grows, these experiences could become a regular part of everyday life.
Statista states the metaverse market is expected to reach $74.40 billion in 2024. Further, the market is projected to grow at a CAGR of 37.7%, resulting in a volume of $507.80 billion by 2030. This potential growth opens the door for substantial long-term returns for companies venturing into this new digital frontier.
Though still in its early stages, the metaverse promises significant long-term returns. According to a report, it could contribute as much as 2.4% to the U.S. GDP by 2035. As more companies and industries get involved, the journey to fully realizing the metaverse will be transformative.
Hence, investors willing to bet on its long-term potential will likely be rewarded in the long run. With that in mind, let’s evaluate the fundamental aspects of the above-mentioned stocks in detail:
NVIDIA Corporation (NVDA)
NVDA is a global provider of graphics, computation, and networking technologies. The company operates through two segments: Graphics; and Compute & Networking. Its products are used in the gaming, professional visualization, data center, and automobile industries.
On October 21, NVDA expanded its collaboration with Microsoft to support AI startups, initially focusing on healthcare and life sciences. Announced at the HLTH healthcare innovation conference, the initiative integrates NVDA’s Inception program with Microsoft for Startups, providing access to cloud credits, AI development software, and expert technical and business support.
This partnership is expected to increase the demand for the company’s AI hardware and software solutions, thereby boosting revenues.
NVDA’s trailing-12-month EBIT and net income margins of 61.87% and 55.04% are significantly above the 4.90% and 3.77% industry averages, respectively. Likewise, its trailing-12-month ROCE of 123.77% compares to the industry average of 4.70%.
For the second quarter that ended July 28, 2024, NVDA’s revenue increased 122% year-over-year to $30.04 billion, while its Data Center Group generated $26.30 billion in revenue, resulting in a triple-digit growth of 154% over the same period last year.
The company’s operating income surged 174% from the year-ago value to $18.64 billion. In addition, its non-GAAP net income amounted to $16.95 billion or $0.68 per share, compared to $6.74 billion or $0.27 per share in the previous year’s quarter, respectively.
The consensus EPS estimate of $0.74 for the third quarter (ending October 2024) represents an 84.3% improvement year-over-year. The consensus revenue estimate of $32.92 billion for the current quarter represents an 81.7% increase from the same period last year. The company has an excellent earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of NVDA have soared 237.2% over the past year and 181.8% year-to-date to close the last trading session at $139.56.
NVDA’s POWR Ratings reflect this outlook. It has a B grade for Sentiment and Quality. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
In the 91-stock Semiconductor & Wireless Chip industry, it is ranked #41. Click here to see the other ratings of NVDA for Growth, Value, Momentum, and Stability.
Meta Platforms, Inc. (META)
META develops products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and wearables worldwide. It operates in two segments: Family of Apps and Reality Labs.
META’s trailing 12-month EBITDA margin of 49.92% is 177.8% higher than the industry average of 17.97%. Also, its trailing-12-month net income margin, ROCE, and ROTA of 34.34%, 35.37%, and 22.34% compare to the respective industry averages of 2.70%, 2.98%, and 1.16%.
For the second quarter that ended June 30, 2024, META’s total revenue increased 22.1% year-over-year to $39.07 billion, while its income from operations grew 58.1% from the year-ago value to $14.85 billion. META’s net income and EPS amounted to $13.47 billion and $5.16, representing increases of 72.9% and 73.2%, respectively, from the prior year’s quarter.
Street expects META’s EPS to increase 20.1% year-over-year in the third quarter (ended September 2024) to $5.27. Its revenue for the about-to-be-reported quarter is projected to grow by 18% from the prior year to $40.30 billion. Further, META has topped the consensus EPS estimate in each of the trailing four quarters, which is excellent.
The stock has gained 47.7% over the past nine months and 59.3% year-to-date to close the last trading session at $563.69.
META’s POWR Ratings reflect this promising outlook. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Quality and a B for Sentiment. Out of 53 stocks in the B-rated Internet industry, it is ranked #17. Click here to see the other META ratings for Growth, Value, Momentum, and Stability.
Autodesk, Inc. (ADSK)
ADSK provides 3D design, engineering, and entertainment software and services. It offers AutoCAD Civil 3D, Autodesk Build, BIM 360, AutoCAD, AutoCAD LT, computer-aided manufacturing (CAM) Solutions, Fusion 360, Inventor tools, Vault, Maya, and 3ds Max, among others. The company’s offerings serve customers in architecture, engineering, construction, product design and manufacturing, and digital media and entertainment industries.
In May, ADSK acquired Wonder Dynamics, the maker of Wonder Studio, a cloud-based 3D animation and VFX solution that uses AI. Wonder Dynamics’ AI-driven tools make visual effects more accessible and affordable, enabling filmmakers to create VFX and CGI faster and at lower costs. The acquisition aligns with ADSK’s goal to enhance creativity by connecting teams, data, and workflows through its Flow cloud platform for the media and entertainment industry.
ADSK’s trailing-12-month gross profit and EBITDA margins of 91.92% and 24.05% are 83.8% and 144.8% higher than the 50.02% and 9.82% industry averages, respectively. Likewise, its trailing-12-month levered FCF margin of 28.14% is 168.9% higher than the industry average of 10.46%.
In the fiscal 2025 second quarter, which ended on July 31, ADSK’s net revenue increased by 11.9% year-over-year to $1.51 billion. Its gross profit rose 12.1% from the year-ago value to $1.36 billion, while its non-GAAP income from operations stood at $560 million, up 14.5% year-over-year.
The company’s non-GAAP net income per share came in at $2.15, representing an increase of 12.6% year-over-year. Also, its free cash flow improved by 58.6% from the prior-year quarter to $203 million.
Analysts expect ADSK’s revenues to increase 10.5% year-over-year to $1.56 billion in the fiscal third quarter (ending October 2024). Its EPS for the ongoing quarter is expected to increase by 2% from the previous year to $2.11. Moreover, the company has surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is promising.
Over the past year, the stock has gained 41.3%, closing the last trading session at $286.30.
ADSK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
It also has a B grade for Growth, Sentiment, and Quality. Among 132 stocks in the Software - Application industry, it is ranked #24. Click here to see the additional ratings for ADSK (Value, Momentum, and Stability).
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NVDA shares rose $0.87 (+0.62%) in after-hours trading Wednesday. Year-to-date, NVDA has gained 181.88%, versus a 22.75% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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