Matterport (MTTR -10.05%) a Unity system (U -8.60%) Both are often mentioned in discussions of the so -called “metaverse,” which combines the physical and digital worlds with augmented reality platforms.
Matterport allows companies to create “digital twins” of their homes, offices, and other parts of the world with 360-degree cameras or mobile apps. These twins can be captured through browsers, mobile apps, or VR heads to experience immersive adventures.
Unity controls more than half of mobile, console, and PC games with its cross-platform game development engine. Used to build popular VR games such as Beat SaberAR filters at SnapSnapchat, and all sorts of other game applications. Developers can add ads, multiplayer features, and paid services to their game.
However, both stocks have given poor returns over the past year. Matterport’s stock rose to a high of $ 33.05 last November, but is currently trading at just under $ 8 per share. Unity closed at a high of $ 201.12 last November, but fell back to the $ 90s low.
Both sectors lost their luster due to rising interest rates and other macro headwinds recorded in the market’s more competitive markets. But is it better to buy today’s “metaverse” stock?
Matterport is facing a near miss
Matterport’s revenue will increase by 87% by 2020, but will only increase by 29% to $ 111 million in 2021. It expects to increase $ 125 million- $ 135 million in revenue by 2022, it said. with a slow growth rate of 12% -21%.
The delay is alarming, as Matterport said it could add $ 747 million in annual revenue by 2025 when it reported last year’s investor day. He has not abandoned that goal, but he needs to increase his annual income by a fixed annual growth rate (CAGR) of 61% between 2021 and 2025 to reach that goal.
Matterport’s losses are compounded by standardized accounting standards (GAAP) and non-GAAP metrics. His GAAP loss has increased from $ 11.5 million in 2020 to $ 46.9 million in 2021, and he expects the loss to more than double by 2022.
Those negative numbers show that Matterport increased its growth potential before merging with a private equity firm (SPAC) last July. However, he insists his delay is short -lived and is due to “chain fixers” in place of the soft demand for his services. Its subscription size is increasing, which is maintaining its pricing power in its niche market, and the number of subscribers has nearly doubled each year to 503,000 per year. a quarter to four.
Given that its problems are transitory, analysts expect Matterport’s revenue to rise to 17% in 2022 and 53% in 2023 – but investors need to take those long -term expectations with salt.
Unity maintains a strong commitment for a long time
Unity’s revenue will increase by 43% in 2020, then by 44% to $ 1.1 billion in 2021. It expects a further 34% -36% growth in 2022, and expects growth. earn annual income over 30% “for the long term.”
Unity is not good at GAAP measures at the moment, but it continues to improve its margins and performance, and it expects not to break on a non-GAAP basis by 2023. It expects to long -term confidence in the growth of the video gaming market, the expansion of AR and VR technologies, and its ever -expanding non -gaming markets.
Unity was re -acquired by Weta Digital, who created special effects for Lord of the Rings a Games of Thrones, to expand the TV and movies industry. The growth of this ecosystem, as well as the stability of its global subscription, could transform Unity into a multi -platform software business. Adobe or Autodesk in the long run.
Unity faces a lot of competition from gaming consoles, such as Epic Games ’Unreal Engine and Request electricity‘Frostbite Engine, but its confidence and rising limits show that there is a lot of price power in that fast -growing market. Analysts expect Unity’s revenue to increase to 35% in 2022 and 29% in 2023.
Evaluations and decision making
Unity’s business model is better than Matterport’s, but its price point is better in relation to its sales.
Unity has sold 18 times its sales this year, which seems like the right selling price for a company with a high line growth of more than 30%. Matterport has sold 16 sales times this year, which is a big sell for a company that expects 12% -21% revenue growth this year. That analysis could be confirmed if Matterport’s growth picks up again in 2023, but macroeconomic headwinds could end that return if companies think the production of “digital twins” is unreasonable.
Simply put, Unity is a much better business in the metaverse and a better investment for growing investors. Matterport may win the bulls if it grows faster again, but it is doing a very thoughtful business in an untested niche.
Leo Sun of Adobe Inc. and Unity Software Inc. Motley Fool owns and promotes Adobe Inc., Autodesk, Matterport, Inc., and Unity Software Inc. Motley Fool promotes Electronic Arts. Motley Fool has an advertising policy.