Although the technology so far has not met many investors’ expectations, I feel that we are just beginning to tap into the potential of the industry. We are using €˜metaverse-like’ technologies increasingly in our everyday lives: from cryptocurrencies to NFTs to VR/AR and much more. It could be a matter of time before these brands lift off to new heights, thus making them comparably undervalued.
So for this article, here are seven cheap metaverse stocks for investors to buy for May. I believe that these brands will be strong performers in the future, and therefore won’t stay cheap for much longer.
Roblox (RBLX)
Roblox (NYSE:RBLX) operates a platform where users can create and play games. It has a vast user base and continues to focus on monetization strategies and partnerships, such as those with high-profile brands for advertising.
This year, RBLX has set a financial guidance with expected bookings of approximately $4.03 billion, up from analysts’ expectations of $3.98 billion, and aims for an adjusted EBITDA of around $490 million. The company plans to cap its capital expenditures related to infrastructure at about $100 million and anticipates a share dilution between 3% and 4%.
Additionally, RBLX is targeting a yearly growth in bookings of over 20% from 2025 to 2027, with an improvement in margins of 100 to 300 basis points annually over the same period €‹.
Looking back at 2023, RBLX reported significant financial metrics including a 38% year-over-year increase in revenue for the third quarter, reaching $713.2 million. Despite these gains, the company reported a net loss of $277.2 million for the quarter.
Trading at just 6.7 times sales, RBLX could be one of those undervalued metaverse stocks to consider.
Unity Software (U)
Unity Software (NYSE:U) is a leading platform for creating and operating interactive, real-time 3D content. Unity basically provides some of the “picks and shovels” that allow the metaverse to come to life.
This year, the company aims to support creators across the entire game development cycle with new AI features and a first look at Unity 6. They are also launching Unity Cloud, a platform aimed at broadening the usability of Unity’s tools in cloud environments.
It also provided a financial outlook for 2024, projecting revenues between $1.76 billion to $1.80 billion and adjusted EBITDA of $400 million to $425 million.
Unity reported strong revenue growth, with a 38% increase year-over-year, and continued to invest in technology that advances its capabilities in real-time 3D content creation.
Stocks like U that provide the 3D engines for the metaverse to thrive may become in hot demand in later years, and of course it also benefits from the growth headwinds of the expanding gaming market as well.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) is known for its advanced graphics processing units that are essential for gaming and professional markets, including applications in the metaverse.
NVDA is still my best pick for one of those undervalued metaverse stocks despite its high multiples for both sales and earnings.
Financially, NVDA has shown robust performance and has projected even stronger outcomes for the upcoming fiscal year. For the first quarter of fiscal 2025, NVDA expects revenue to be around $24 billion. This guidance exceeds Wall Street expectations.
NVDA trades at 75 times earnings and 36 times sales. However, the expected growth rates for these metrics make them lower on their forward measures, at 39 times earnings and 22 times sales, respectively. This means that although these metrics may be high today, analysts are confident that NVDA’s fundamentals will improve in the future.
There’s also some potential for NVDA to do a stock split in the coming years, with it trading for nearly $900 per share at the time of writing, which could incur some indirect benefits to investors.
Shopify (SHOP)
Shopify (NASDAQ:SHOP) provides an e-commerce platform that is expanding into the metaverse by enabling new forms of digital commerce and integration of NFTs.
Shopify’s metaverse strategy includes enhancing digital fashion, which represents a significant market opportunity projected to reach $50 billion by 2030. Digital fashion on Shopify allows for the creation of 3D clothing and accessories that are more sustainable and cost-effective.
Finally, Shopify’s President has expressed optimism about the future of retail in the metaverse, emphasizing the importance of integrating commerce features into online platforms.
As one of the most popular web store builders, SHOP is positioning itself well to take advantage of the rising tide of metaverse products for store owners to tap into, potentially selling them on sites such as Instagram and Facebook.
Analysts are very optimistic about SHOP’s near-term financial performance for FY2024, anticipating that its EPS will rise 944.33% to 1.04 this year. This then makes SHOP one of those undervalued metaverse stocks to consider.
ProShares Metaverse ETF (VERS)
ProShares Metaverse ETF (NYSEARCA:VERS) is an exchange-traded fund that invests in companies heavily involved in the metaverse sector.
The financial data for VERS reveals an asset total of $5.74M, with a relatively low expense ratio of 0.58%, and a P/E ratio of 25.42. The fund distributes a dividend yield of 0.69% with an annual dividend of $0.28 per share and maintains a conservative payout ratio of 17.44%. It has shown strong performance with a 1-year return of 24.81%.
Key stock holdings of the fund include leading tech companies like Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) 4.97%, Nvidia 4.60%, Apple (NASDAQ:AAPL) 4.55%, Amazon (NASDAQ:AMZN) 4.55%, and Microsoft (NASDAQ:MSFT) 4.38%.
I think that VERS could be one of those undervalued picks for investors to consider if they’d like to invest in a broad-basket of metaverse stocks. It may go well with people who are particularly bullish on the sector, and its intersectionality with AI and robotics could further the bull case.
Fastly (FSLY)
Fastly (NYSE:FSLY) operates an edge cloud platform, which is crucial for delivering content with reduced latency. In addition to U, it’s one of those companies that provided the crucial infrastructure to make the metaverse a possibility.
FSLY has issued guidance for 2024, forecasting total revenue to range between $555 million and $565 million. This represents a slight decrease from earlier projections of up to $585 million due to pricing pressures.
For the first quarter of 2024, Fastly reported a positive operating cash flow of $11.1 million and continues to focus on optimizing operations despite a non-GAAP operating loss.
I still believe that FSLY is an undervalued option for investors. For one, analysts have given the stock a 69.29% predicted upside from its current level. Its EPS also set to surge in the triple digits from FY2026 to FY2027, thus making it comparatively undervalued on an EPS basis.
Coinbase (COIN)
Coinbase (NASDAQ:COIN) is one of the largest cryptocurrency exchanges, and it’s becoming increasingly involved in the metaverse through its NFT marketplace.
This platform supports NFTs on the Ethereum (ETH-USD) blockchain and aims to introduce more blockchains in the future.
Coinbase has also introduced a mobile DApp browser and a DeFi wallet, enhancing user interaction with decentralized finance (DeFi) protocols for lending, borrowing, and trading. This includes a co-custodial hot wallet setup.
However, in its first quarter of 2024, Coinbase experienced some challenges, notably a consensus revenue estimate reduction of 14%.
Still, I am firmly bullish on COIN’s long-term prospects, and I also think that this year will be the one where cryptos such as Bitcoin (BTC-USD) shine, especially since many FAANG stocks could be seen as too overvalued for most investors’ tastes.
COIN could then be one of those undervalued metaverse stocks for investors to consider.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Matthew started writing coverage of the financial markets during the crypto boom of 2017 and was also a team member of several fintech startups. He then started writing about Australian and U.S. equities for various publications. His work has appeared in MarketBeat, FXStreet, Cryptoslate, Seeking Alpha, and the New Scientist magazine, among others.