The metaverse is a collective virtual shared space, merging emerging technology fields like augmented reality (AR) and virtual reality (VR) with the connective tissue of the internet. On a metaverse platform, users can interact with one another through avatars. However, it is important to note that the idea of a metaverse is still relatively novel and only gained traction in the early 2020s, driven by advancements in VR, blockchain and social media. The social media giant Facebook, rebranded as Meta Platforms (NASDAQ:META), and companies such as Microsoft (NASDAQ:MSFT) and Roblox (NYSE:RBLX) have invested heavily in developing metaverse platforms.
Nowadays, as the market and technology world is reeling from the hype around generative artificial intelligence (AI), interest in the metaverse has definitely waned. Meta, for example, is looking to expand its reach in AI technologies and has put the whole metaverse idea on the back burner.
That all means investors should dump some metaverse stocks to sell. Below are just three of them.
Unity Software (U)
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Unity Software (NYSE:U) is an online software platform that has empowered game developers and content creators to design, implement and share 3-D experiences to users worldwide. The platform supports a wide range of platforms, including mobile devices, PCs, consoles and AR/VR headsets. This versatility is crucial for the metaverse, which aims to provide seamless experiences across different devices and environments. Unity Software’s deep exposure to the 3-D design space endowed the company with the right set of tools to take on the burgeoning metaverse space.
Way back in 2021, Unity Software entered a partnership with UFC, which focused on bringing sports to the metaverse, allowing fans to experience live sports events in immersive 3D environments. Furthermore, Unity Reflect assists engineers in developing realistic, virtual environments for building and architecture lifecycles.
However, in recent years, Unity Software has struggled to expand earnings and revenue amidst a broader slowdown in the gaming sector. In the company’s first-quarter results for fiscal year 2024, revenue was $460 million, down 8% year-over-year. Unity shares have collapsed 61% for the year, and a shaky macroeconomic environment could continue to move shares downward.
Roblox (RBLX)
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Roblox has incredibly transformed into a global online entertainment platform over the past several years. In particular, the tech firm offers Roblox Studio, a free toolset that allows developers and content creators to build, publish and operate 3D experiences, while Roblox Client allows users to explore 3D experience. Roblox’s virtual platform thrives on its virtual economy, underpinned by its virtual currency — Robux. This virtual currency generates a high level of user engagement and stickiness for the platform, and that’s key to building any kind of metaverse experience. The online gaming platform has 77.7 million daily active users, as of its latest earnings release.
Unfortunately, similar to Unity Software, Roblox has suffered from sluggish gains in its key performance indicators (KPIs) as gaming monetization has become difficult amidst the poor macroeconomic environment and the slowing economy. In fact, in the company’s first-quarter earnings report for fiscal year 2024, revenue and earnings came below Wall Street estimates. Roblox’s net loss, in particular, saw no meaningful improvements from the first quarter of fiscal year 2023.
RBLX shares are down more than 13% year-to-date, and without significant reductions to Roblox’s net losses, shares are unlikely to make a strong rebound.
Fastly (FSLY)
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Fastly (NYSE:FSLY) is an edge cloud computing platform that provides infrastructure as a service (IaaS) technology, empowering developers to create and deliver digital experiences. Edge cloud computing refers to a technique for distributing data closer to the original source of that data or near the edge of a data network. Because edge devices process and prepare data locally, there are fewer bandwidth and latency issues. The New York Times, for example, uses Fastly to handle the high traffic volumes that come with breaking news and major events. Because Fastly is an important enabler of streaming services, the company will surely play a role in creating the metaverse. That is to say, as metaverse content proliferates, demand for quick content delivery mechanisms will also be high.
Unfortunately, the company has suffered from slowing earnings and revenue growth in recent fiscal quarters. An ongoing class action lawsuit, which alleged Fastly misled investors on its financial guidance, tanked the edge platform’s share price. FSLY shares have plummeted 58% since the start of 2024.
On the date of publication, Tyrik Torres 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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