The top two metaverse stocks to buy before 2023 are as follows:
Since Facebook changed its name to Meta Platforms, there has been a deluge of metaverse-related news in the media. Despite this, there is still a great deal of uncertainty surrounding the third iteration of the internet.
No one knows how successful, or even if, the metaverse will be in the long run. Regardless, if it comes to fruition, a large number of stocks will benefit.
CrowdStrike (NASDAQ: CRWD) and Unity Software (NASDAQ: UNITY) are two companies that provide metaverse services (NYSE: U).
Even though neither of them is betting everything on the metaverse, they both stand to gain if this innovation changes the world. The benefits of taking a more conservative approach to metaverse investing are that there is more upside and less downside.
CrowdStrike is a cyber-security company that protects the metaverse.
Crowdstrike provides network access point security software to protect network access points on endpoints. It also has zero-trust protection for devices, identities, and, most recently, data, thanks to its acquisition of SecureCircle.
Crowdstrike has an advantage over legacy providers in that it was designed specifically for cloud computing. As a result, it is a small and lightweight program that employees can access from any device they choose.
At this time, Crowdstrike does not have a solution that is specifically designed for the metaverse.
Customers of the company, on the other hand, include video game companies such as The Pokémon Company, which create metaverse content.
It is critical to provide security to these companies because metaverse users do not want their data to be compromised as a result of a provider’s inadequate security protocols.
CrowdStrike has been growing at a rapid pace even in the absence of metaverse-driven catalysts.
Revenue increased by 63% to $380 million in the third quarter (which ended on October 31), and annual recurring revenue increased to $1.51 billion.
Even with this expansion, CrowdStrike continues to be a loss-making enterprise. The company did generate free cash flow of $123.5 million, representing a free cash flow margin of 32.5 percent, which was quite impressive. CrowdStrike has $1.9 billion in cash on its balance sheet and is prepared to deploy that cash if and when an expansion opportunity presents itself.
Because CrowdStrike is the market leader in its field and has demonstrated excellent execution, the company is highly valued.
Despite the fact that the company’s stock price has fallen by nearly $100 since the middle of November, CrowdStrike’s price-to-sales (P/S) ratio remains high at 35.
SentinelOne and Microsoft are just a couple of the many competitors in the cybersecurity space.
Gartner’s Magic Quadrant for Endpoint Protection Platforms has named CrowdStrike as a leader in the category of “Completeness of Vision,” and the company continues to be positioned as a leader in this category.
Crowdstrike is a rapidly expanding security provider that protects a wide range of businesses that are not necessarily involved in the metaverse.
With or without the metaverse, it still has a compelling investment case to support it.
The company’s addressable market will grow as a result of its expansion into the metaverse.
Visualizing the metaverse as a single entity
The Unity software represents a more direct investment case in the metaverse. Its software enables content creators to create 2D, 3D, augmented reality (AR), and virtual reality (VR) content for a variety of industries using a single platform.
While video games have traditionally been the primary application for Unity, the platform is now being used in other fields such as engineering and architecture.
When a company’s software is capable of creating realistic environments in video games, it makes sense for it to branch out into the field of visualizing products when they are presented to potential customers.
Unity’s revenue increased by 43% in the third quarter, exceeding management’s expectations for the quarter. Customers who spent more than $100,000 increased from 739 to 973, representing a 31.6% increase.
The dollar-based net expansion rate of the company was perhaps the most impressive metric. Despite the fact that it was lower than in the same period the previous year, it was still an incredible 142%.
In the third quarter of 2013, the Ultimate Fighting Championship (UFC) and Unity’s Metacast announced a partnership.
The concept is to capture an event using 5 million voxels (three-dimensional pixels) per second and then recreate the three-dimensional action in real-time.
Consumers and broadcasters can benefit from this by being able to generate an unlimited number of impossible camera angles. In addition, Unity believes that this technology could be used to assist officials in other sports.
The use case for the metaverse could be enormous, as a UFC viewer could virtually sit cageside while watching the fight through a virtual reality (VR) headset.
In spite of the fact that Unity is not profitable at this time, management anticipates that the company will generate positive non-GAAP earnings per share and positive free cash flow in the fiscal year 2023.
Until then, investors will have to endure market valuation swings as the market punishes high-growth stocks that generate no earnings, as has happened recently.
Unity has more than $1.25 billion in cash and marketable securities on its balance sheet, which is more than enough to cover the company’s operating expenses until the end of fiscal year 23.
Unity has a P/S ratio of 40, which is similar to CrowdStrike’s ratio of 20. With the recent sell-off, this metric has been reduced to levels seen earlier this year, but it is still significantly higher than the levels at which Unity has traded for the majority of the year 2021.
It is the cheapest it has ever been for CrowdStrike during the year 2021.
Both companies will have an impact on the future of the metaverse in some way. Should the metaverse come crashing down, CrowdStrike and Unity Software will continue to be profitable investments.
These stocks are not suitable for investors who are unable to withstand volatility, as both have experienced more than 30% declines from their all-time highs in 2021.
Investors should, however, take advantage of any opportunities to purchase these stocks at a discount when the market presents them.
While the success of the metaverse is still up in the air, CrowdStrike and Unity have accomplished a great deal and will continue to be dominant forces in their respective industries.
Conclusion
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