Metaverse has been a buzzword in the technology industry for quite some time. As this virtual realm evolves, it has shifted from being a niche concept to a transformative force that’s capturing the attention of companies and investors worldwide.
In this article, we’ll delve into three fundamentally sound stocks: Meta Platforms, Inc. (META), Autodesk, Inc. (ADSK), and Cloudflare, Inc. (NET), with explosive growth potential within the metaverse.
The metaverse is rapidly becoming a cornerstone of the digital economy. As this immersive virtual universe expands, it promises to revolutionize the way we interact, work, think, and live, blending the physical and digital worlds into a seamless experience.
According to Statista, the metaverse market is expected to reach $74.40 billion in 2024. The market is further projected to grow at a CAGR of 37.7%, resulting in a volume of $507.80 billion by 2030. Significant advancements in augmented reality (AR), virtual reality (VR), mixed reality (MR), and 3D visualization drive market growth.
With major tech companies investing heavily in metaverse infrastructure, the market is poised for exponential growth, offering unprecedented opportunities for investors. For those looking to capitalize on this trend, identifying companies not just participating but leading the charge in the metaverse is crucial.
Thus, three stocks META, ADSK, and NET, which are at the forefront of the metaverse revolution, could be ideal buys. Let’s discuss the fundamentals of these feature stocks in detail.
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 globally. The company operates in two segments: Family of Apps and Reality Labs.
META’s trailing-12-month gross profit margin of 81.49% is 59.8% higher than the industry average of 50.99%. Its trailing-12-month EBIT margin of 41.21% is 329% higher than the industry average of 9.61%. Likewise, the stock’s trailing-12-month net income margin of 34.34% is considerably higher than the industry average of 3.33%.
For the second quarter that ended June 30, 2024, META’s revenue increased 22.1% year-over-year to $39.07 billion. Its income from operations rose 58.1% from the year-ago value to $14.85 million. The company’s net income and EPS came in at $13.47 billion or $5.16, up 72.9% and 73.2% from the previous year’s quarter, respectively.
Analysts expect META’s revenue and EPS for the third quarter (ending September 2024) to increase 17.5% and 19.1% year-over-year to $40.11 billion and $5.23, respectively. In addition, the company has topped the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
META’s shares have gained 9.4% over the past month and 45.5% year-to-date to close the last trading session at $519.10.
META’s POWR Ratings reflect its promising prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
META has an A grade for Quality and Sentiment. The stock is ranked #15 out of 51 stocks in the B-rated Internet industry.
Click here to access the additional META ratings (Growth, Value, Momentum, and Stability).
Autodesk, Inc. (ADSK)
ADSK provides 3D design, engineering, and entertainment technology solutions. The company’s products include AutoCAD Civil 3D, Autodesk Build, Autodesk BIM Collaborate Pro, AutoCAD, Revit, Flow Production Tracking, Maya, ShotGrid, and 3ds Max.
On May 21, ADSK announced the acquisition of Wonder Dynamics, makers of Wonder Studio, which is a cloud-based 3D animation and VFX solution combining AI with established tools. With this acquisition, Autodesk aims to enhance 3D content creation across the media and entertainment industries by offering cloud-based AI technology.
On April 24, ADSK signed an interoperability agreement with the Nemetschek Group to advance open collaboration and efficiencies for the architecture, engineering, construction, and operations (AECO) and media and entertainment (M&E) industries.
The strategic agreement will strengthen the existing interoperability between the companies' industry cloud and desktop products, facilitating smoother information exchange across their solutions.
In the fiscal 2025 first quarter that ended April 30, 2024, ADSK’s total revenue increased 11.7% year-over-year to $1.42 billion. Its non-GAAP income from operations rose 21.3% from the year-ago quarter to $490 million. The company’s net income grew 56.5% from the prior year’s period to $252 million.
Further, the company’s non-GAAP net income per share increased 20.6% year-over-year to $1.87. Autodesk’s free cash flow was $487 million for the quarter.
Analysts expect ADSK’s revenue for the second quarter (ended July 2024) to increase 10.2% year-over-year to $1.48 billion. Its EPS for the same quarter is expected to grow 4.9% year-over-year to $2. Moreover, the company surpassed consensus revenue and EPS estimates in all four trailing quarters.
Shares of ADSK have surged 4.7% over the past month and 17.5% over the past year to close the last trading session at $256.99.
ADSK’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary system.
ADSK has a B grade for Quality, Growth, and Sentiment. It is ranked #26 out of 129 stocks in the Software – Application industry.
To see ADSK’s Value, Momentum, and Stability ratings, click here.
Cloudflare, Inc. (NET)
NET operates as a cloud services provider that delivers various services to businesses. It offers an integrated cloud-based security solution to protect various platforms, including public cloud, private cloud, software-as-a-service applications, and IoT devices; and website and application security products, SSL/TLS encryption, and rate limiting products.
On May 30, NET acquired BastionZero, a Zero Trust infrastructure access platform, to further strengthen remote access to core IT systems for customers of Cloudflare One, the company’s secure access service edge (SASE) platform.
Matthew Prince, co-founder and CEO of Cloudflare, said, "Incorporating BastionZero into Cloudflare One gives IT teams access to an organization's most critical inner workings securely, wherever they are. Millions of organizations around the world trust Cloudflare to protect their systems and data so they can focus on their business and their customers. The addition of BastionZero is just one more way we can protect them like no one else can."
Also, on the same day, NET and CrowdStrike Holdings Inc. (CRWD) expanded their strategic partnership to secure networks and power the AI-native Security Operations Center (SOC).
By integrating cloud-native, market-leading Zero Trust protection and connectivity from Cloudflare One™ with best-in-class AI-native cybersecurity from CrowdStrike Falcon® Next-Gen SIEM, joint channel partners can drive vendor consolidation while reducing costs and operational complexity for customers globally.
During the second quarter that ended June 30, 2024, NET’s revenue increased 30% year-over-year to $401 million, and its non-GAAP gross profit was $316.60 million, up 32.1% from the prior year’s quarter. The company’s non-GAAP income from operations grew 180.8% from the prior year’s quarter to $57 million.
Additionally, the company’s non-GAAP net income came in at $69.50 million, or $0.20 per share, increases of 106.2% and 100% from the previous year’s quarter, respectively.
Street expects NET’s revenue and EPS for the third quarter (ending September 2024) to increase 26.4% and 13% year-over-year to $424.12 million and $0.18, respectively. Further, the company surpassed the consensus revenue and EPS estimates in all four trailing quarters, which is remarkable.
NET’s stock has soared 1.8% over the past month and 29.4% over the past year to close the last trading session at $81.26.
WRB’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has an A grade for Growth and a B for Sentiment. NET is ranked #17 among 23 stocks in the B-rated Software-Security industry.
Click here to access NET’s ratings for Quality, Momentum, Value, and Stability.
What To Do Next?
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META shares were trading at $516.00 per share on Wednesday afternoon, down $3.10 (-0.60%). Year-to-date, META has gained 46.08%, versus a 18.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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