The metaverse is a term used to describe virtual or alternative reality. This is usually experienced via gaming or headsets that allow me to ‘be’ in a different place. The sector is really popular at the moment and is only growing in demand from users around the world. As a result, stocks related to this area are also shooting higher in value. So here are three ways I can use stocks to benefit from this exciting theme.
Going direct
Firstly, I can invest in companies that are at the core of the metaverse. This relates to firms that host a virtual platform that allows users to register and get involved. One example of a stock in this area is Roblox. The business is one of the largest game creation systems and is expanding rapidly. The share price has gone from an IPO price of $45 in early spring to $113 currently. In fact, it has gained 45% in the last month alone.
Top stocks like this are a good way for me to access the gains from the metaverse. Logically, if the virtual world development continues to attract people, then the hosts (like Roblox) should stand to benefit the most.
The risk is that the specific stock I invest in doesn’t become the prominent ecosystem of choice going forward. As not all of the hosts are publically listed companies, I have an issue here as I can’t really diversify my risk.
Top stocks with indirect exposure
Another way to use top stocks for metaverse access is by investing in stocks that are indirectly related to the platforms. For example, Sony produces virtual reality headsets for the PlayStation. These headsets are likely going to play a large part in the user experience for the metaverse, to visually transform users to the alternative reality.
If the metaverse does continue to expand, I’d expect companies like Sony to see higher demand for the VR headsets. It might also branch off to specific add-ons, or sign a lucrative agreement with one or more of the hosting platforms to provide the headsets. It’s just one example, but is that buying stock in these types of companies should be less risky than a platform host stock. However, if the metaverse does do well, then I should see some benefit from these type of top stocks.
The risk here is that if a platform provider decides to make its own hardware, it could cut Sony out of the picture.
Metaverse advertising plays
Finally, I can buy stocks that are early movers in advertising and selling in the metaverse. A stock that comes to mind is Nike. Recently, Nike announced that it has designed Nikeland within the virtual reality world of Roblox.
In-game purchases are still done with real money (fiat or crypto). So I’m certain that Nike will be able to generate revenue from this collaboration in the future. I think it’s a very smart move by the business. It opens a completely new potential revenue stream for the brand.
Overall, the metaverse is still a very new and young area. I’d look to invest in a host of stocks from each part of the above to diversify my risk going forward.
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Jon Smith has no position in any share mentioned. The Motley Fool UK has recommended Nike. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
