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Before the surge in popularity of Microsoft-backed OpenAI’s ChatGPT, the tech industry was abuzz with discussions about a different groundbreaking concept: the metaverse. Investors rushed to gain exposure to the “next big thing.” However, be cautious because many of these doomed metaverse stocks and companies behind them find themselves in trouble a few years later.
Some analysts saw metaverse as a potential new phase in the evolution of the internet, and often described as the next significant revolution in digital technology. Metaverse envisions a fully immersive, three-dimensional virtual space where users can interact, work, play, and participate in a digital economy, transcending the traditional boundaries of the internet as we know it today.
This digital universe proposes to blend virtual reality (VR), augmented reality (AR), and video where users “live” within a digital universe. Mark Zuckerberg, a leading voice in tech, was particularly instrumental in propelling the metaverse narrative. Demonstrating his commitment to this vision, Zuckerberg took a significant step in October 2021 by rebranding Facebook to Meta (NASDAQ:META), signaling a strategic pivot towards the metaverse.
However, more than two years after this bold move, Zuckerberg’s ambitious vision for the metaverse appears to be encountering significant challenges. Reality Labs, Meta’s division dedicated to virtual and augmented reality technologies, has incurred losses measured in tens of billions of dollars.
While Meta stock has skyrocketed in recent months, the rally is a result of improving cost efficiencies and Reels taking off rather than metaverse investment paying off. While these losses can be attributed to long-term investments, with Meta not anticipating immediate returns, the lack of substantial progress raises concerns about the viability of such a massive gamble.
Here we look at 3 doomed metaverse stocks that investors should avoid until the macroeconomic environment improves.
Match Group (MTCH)
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Match Group, Inc. (NASDAQ:MTCH) is a leading provider of dating products designed to help people connect online and help them find relationships. The company has become synonymous with online dating through its portfolio of well-known brands.
Its key products include Tinder, the swipe-based app that revolutionized the dating scene; Match.com, one of the first dating websites that cater to individuals seeking long-term relationships; Hinge, marketed as the app “designed to be deleted” for those looking for serious connections; and OkCupid, which uses a question-based algorithm to find compatible matches.
Together, these platforms cater to a diverse range of preferences and demographics, making Match Group a dominant force in the global online dating market. However, this dominance hasn’t really translated into a strong stock performance with shares down ~80% from the record high set in 2021.
Amid these issues, Match Group decided to reduce its focus on developing metaverse dating features within Tinder and has abandoned its plans to introduce a Tinder Coins currency within the app.
The company recently reported an earnings per share (EPS) of $0.81 for the quarter, significantly better than the anticipated $0.50. Its revenue was reported at $866.2 million, exceeding analyst expectations of $861.33 million.
However, Match Group disclosed a 5% YoY drop in its paying user base during the fourth quarter, with the number falling to 15.2 million. For the upcoming first quarter, the company projects its revenue to be in the range of $850 million to $860 million, which was slightly below the average analyst forecast of $867 million.
Matterport (MTTR)
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Matterport Inc. (NASDAQ:MTTR) is a technology company specializing in spatial data capture and creating digital twins of physical spaces. Its innovative platform enables users to create, modify, navigate, and share 3D spaces online, revolutionizing industries like real estate, architecture, and construction by enhancing virtual tours, property listings, and project planning processes.
The company reported results for the third quarter in November with a 35% YoY increase in total subscribers, reaching 887,000. It also saw a 28% rise in spaces under management, totaling 11.1 million. Total revenue grew by 7% from the previous year to $40.6 million, with subscription revenue climbing 20% to $22.9 million.
Overall, Matterport stock surged on these results. However, these gains did not prove to be sustainable with shares plunging in December. The decline in Matterport’s stock price in December was driven by a change in investor sentiment regarding the company’s short-term earnings potential, which appears to be years away from aligning with its substantial market capitalization. Hence, investors are likely to stay away from this doomed metaverse stock in the near term.
Unity Software (U)
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Unity Software Inc. (NYSE:U) is one of the leading platforms for creating and operating interactive, real-time 3D content. Widely used by game developers, it also serves industries such as film, automotive, and architecture. Unity’s comprehensive suite enables the development, management, and monetization of 2D, 3D, VR, metaverse, and AR experiences for mobile, console, and desktop platforms.
Its shares fell more than 25% in the last few weeks as the company continues to cut jobs in an effort to reduce costs as it fights to accelerate its top-line growth. Just in November, Unity’s shares dropped almost 15% after the company refused to provide a financial forecast for Q4 2023. Moreover, investors are likely to stay away from Unity stock in the near term amid rising uncertainty.
The company cited ongoing changes that may result in further job reductions and the discontinuation of certain products as reasons for this decision. Overall, Unity stock is down about 15% over the last 52 weeks.
On the date of publication, Shane Neagle did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Shane Neagle is fascinated by the ways in which technology is poised to disrupt investing. He specializes in fundamental analysis and growth investing.
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