- Qualcomm’s processors are already in use in virtual reality headsets.
- Zoom has intentions to integrate online meetings into the metaverse.
The coming network of virtual reality realms could produce an exorbitant income for the companies that start the movement and excellent investor returns. And, some metaverse stocks are bound to blow up. Obviously, not every metaverse stock will experience parabolic share price hikes. But we bet on Qualcomm (NASDAQ:QCOM) and Zoom Video Communications (NASDAQ:ZM) to make a big jump. [For more metaverse stocks we love, read 2 Metaverse Stocks to Buy.]
Qualcomm’s share price has risen dramatically in recent years, and it seems to have reached a certain point of the parabola. It has increased by more than 200% over the last three years. Despite its annual growth rate decreasing to 20% recently, its metaverse position may be the next driving force for Qualcomm’s success.
Qualcomm is known for its role in powering smartphones. However, it has grown increasingly crucial in the metaverse. For example, Qualcomm produces part of Meta’s headset. Indeed, components utilized in the Oculus Quest 2 VR headsets sold by Meta Platforms (NASDAQ:FB) are Qualcomm manufactured.
Microsoft collab too
Furthermore, at CES – the tech showcase last January– it revealed a metaverse-related partnership with Microsoft (NASDAQ:MSFT). This partnership entails the development of a line of bespoke chips to power lightweight augmented reality glasses and software that will link together the Microsoft Mesh platform and Qualcomm’s Snapdragon Spaces XR development platform.
Qualcomm is also aggressively defending its competitive moats in other areas. For example, smartphone makers still can’t produce 5G phones without using a Qualcomm chip. In addition, regulators halted Nvidia‘s (NASDAQ:NVDA) planned acquisition of Arm Holdings, preventing a significant competitor from gaining control of a critical component of many Qualcomm products.
Qualcomm did not provide data on VR headset sales. However, the IoT sector, which belongs, accounts for around 17% of Qualcomm’s revenue today, making it second only to its handsets business in terms of size. Also, IoT earnings grew 41% year over year, roughly matching the handsets sector’s 42 percent rise.
Additionally, given that its P/E ratio is just 19, it appears that investors have not factored in the company’s effective rate of growth. As a result, it is trading at a lower price than other technology sector giants like Apple (NASDAQ:AAPL) or Nvidia, which sell for 28 and 61 times earnings, respectively.
Qualcomm is a cheap stock. The company’s low price-to-earnings ratio might suggest that the stock has little downside. It has fallen by only 13% since its peak in the recent technology sector selloff. This suggests considerable force at a time when many metaverse stocks have lost over two-thirds of their value. Qualcomm’s valuation, as well as the chipmaker’s potential to drive growth in the metaverse, might entice investors to buy shares.
One of several things that will occur in the metaverse is online meetings, and Zoom plans to take advantage of this trend. Bill Gates believes that most people would move away from the “Hollywood Squares” style of online meetings and toward 3D avatar-based metaverse settings.
Yet, even though Microsoft has yet to compete with Zoom, neither have other notable technology corporations like Cisco (NASDAQ:CSCO). Nevertheless, it holds a 75 percent market share in web conferencing, significantly above Cisco’s Webex at 7%, according to Datanyze.
Zoom also has a better chance of retaining market share because of the metaverse. Since adopting the Meta’s Oculus headsets, Zoom has been using them to provide a virtual meeting experience. Thanks to the program, users can even perform real-life hand gestures and move around in the virtual room. Zoom also supports a whiteboard function, where all participants may view and input, which further mimics an in-person meeting setting.
Zoom, for example, provides custom software for businesses like social media platforms, games, and streaming services. These apps help a firm enjoy fast revenue growth and increased user engagement. Zoom reported revenue growth of 55% in FY 2022, aided by a non-GAAP net income increase of 55%. Year over year revenue growth slowed slightly to 21% in the fourth quarter, causing Zoom stock to drop. Nevertheless, the midpoint forecast calls for just 11% annual revenue growth at the end of 2023.
On the other hand, analysts predict that revenue will rise by 14% in 2024. Zoom Phone and segments such as the metaverse may propel the growth rate.
In the latest quarter, Zoom Phone acquired 550,000 paid seats. Furthermore, the number of clients with an average recurring revenue (ARR) of more than $100,000 grew by 149%. While those with an ARR of more than $10,000 rose by 122%. Although only about 2,700 customers spend more than $100,000 per year with Zoom, these clients now make up 23% of the company’s revenue as of Q4 (up from 18% in Q4 2020), suggesting potential for growth within a hot market sector.
Furthermore, with its price-to-sales ratio at 9 and price-to-earnings ratio at 26, Zoom has lost a lot of value. However, given that online meetings will most likely become a permanent part of the workplace, Zoom should continue to expand as the metaverse and products like Zoom Phone attest to that fact. Such potential makes it one of the no-brainer stocks to invest in right now.
Metaverse stocks could truly blow up in the near future, and when they do, we think these are the stocks to own.