Is the Metaverse worth investing in?

Mark Zuckerberg, CEO of the newly named Meta (formerly Facebook), outlined his vision for the future of the social media giant, focusing on the new & futuristic digital world called the “Metaverse”.

So what exactly is the Metaverse?

TLDR: It is a virtual reality space where people can use avatars to interact with each other through work, travel, or entertainment. Think Roblox, where it has its own virtual in-game economy and digital assets, but in a more adult-ish version.

The Metaverse can be described as an even more immersive and embodided internet where you can do almost anything you can imagine. You could get together with friends and family, work, learn, play, shop or even travel around virtually together. All these can be achieved by controlling an avatar in the virtual reality space that can move, speak or even perform actions and expressions by you.

You can also create your own virtual property, build new worlds and even own virtual assets as you would physical assets. Recently, people have been using non-fungible tokens as a decentralized method of tracking and establishing ownership of virtual goods. This will most likely be the same case in the Metaverse where it may feature its own economy system where we can even trade or sell these digital items for real money. This is for all you NFT lovers.

Meta believes this is the next phase of the internet and evolution of social connectivity, and this has aparantly been attracting lots of interests from investors and tech giants like Microsoft, Sony, Nintendo... Heck even Disney announced it's plans to join the metaverse!

So the question is: Will we be able to finally live out our "Ready Player One" fantasy in this utopia for social interactions, or will this be the start of an anti-social dysfunctional world for humans to live in?

There a few possibilities to this:

1. Metaverse turns out to be a huge success, rewarding it's investors.
2. Metaverse fails to deliver and it probably becomes the biggest technology flop in history.
3. The project was a success, but backfires as a start of an anti-social dysfunctional world heavily criticized on.

The list goes on...

So, Should We Invest in The Metaverse?

Investing into companies that is playing apart in the Metaverse might sound like a no-brainer for investors. Take Apple and their iPhones for example. If the world had known the iPhone would be such a huge success during 2007 (when the stock price was still $4 ~$5 USD), we would've seen many investors "all-in" $AAPL.

But for the case of Metaverse, this project is still in its very early stages and even though it may sound like a glorifying idea to "transform" how the internet is perceived to be, there's no telling if Mark Zukerburg's project will be a success or just a huge bust.

The problem lies here: There is simply not enough proof of concept yet.

We have seen many big tech companies failing with their innovations and technologies.

Some examples include the Facebook Phone back in 2013, Google glasses, and Nintendo's Virtual Boy which was supposed to be the first console capable of displaying 3D VR graphics (We all know that was a huge mess...).

This goes to show that even a huge project like Metaverse has it's risk of failure. At this point, its just too early to tell yet.

However putting Metaverse aside, companies who are playing apart in the project like Nvidia ($NVDA), Unity ($U) and Meta ($FB) still have strong fundamentals regardless if Metaverse does indeed becomes successful or not. So you could technically still invest with relatively "lower risk" in the Metaverse with these companies if you have a longer time horizon by your side. This is assuming you have done your due diligence and are comfortable with the potential volatility ahead!

Let's take a quick (like a really quick one) Meta ($FB) analysis:

• IF Metaverse doesn't play out, yes they will be seeing lower profits and cashflow in the future.
• BUT... Meta is still the market leader in the ad space and their core ads business model still remains profitable and durable for the long term.
• With the iOS privacy policies implemented by Apple, it has made ad-tech companies like Meta harder to track its users.
• Another controversy which created a sale on the stock was the whistleblower story.

But admist all the drama, political threats and pressures from Apple, the company still continues to excel. Meta has grew its daily active users 6% year over year while increasing its average revenue per user by 27%. During its Q3 results, Meta also reported a 5% year-over-year revenue growth totalling $29 billion while converting about 33% of this total ($9.5 billion) to free cash flow.

This investment in Meta will suit patient investors who are in it for the long term. Regulations still continue to be a potential threat to Meta but the upsides the company has to offer are simply too diffcult to ignore.

I hope this has helped you gained clarity about the Metaverse and as always, do your own research and invest wisely.

Disclaimer:

The opinions expressed here are soley my own based on my own research and does not constitute either financial advice or an offer of an invitation to offer to acquire, dispose of, subscribe for or underwrite any of the financial instruments described herein. Any financial decision should only be made after consulting appropriate professional advisors or by conducting your own research.