Are you ready for the metaverse? Yeah, I’m not either. But many people are enjoying living their life in a virtual world. However, virtual reality and augmented reality goes beyond the world of video games. The applications for this technology include remote assistance, training, and education.
And like e-commerce, this was a sector that experienced significant growth during the Covid-19 pandemic. Necessity frequently inspires new ways of thinking and so it is that millions of Americans had to figure out how to do things remotely.
But what you want to know as a prospective investor is whether there’s more growth in store. Fortune Business Insights reports that the global market for VR gaming will reach $45.2 billion by 2027. That’s up from $5.1 billion in 2019 and $17 billion in 2020. That comes out to a compound annual growth rate (CAGR) of 31.8%. That should get your attention. It’s certainly drawn the attention of many of the tech giants. Many of the FAANG stocks are investing in this market with the expectation of massive future growth.
If you’re looking to invest in this growing sector, we’ve put together this special presentation that highlights seven virtual reality stocks that, while they dabble in the virtual world can deliver real profits for your portfolio.
Quick Links
- Facebook
- Apple
- Immersion Corporation
- Unity Software
- Nvidia
- Sony
- Lumentum Holdings
#1 - Facebook (NASDAQ:META)
Facebook (NASDAQ: FB) is the first of our virtual reality stocks to buy. It was the company’s CEO Mark Zuckerberg who told investors that they will soon be living in the metaverse. However, you might expect that from Facebook. The company has skin in the game after its purchase of Oculus in 2014. If nothing else this should give investors confidence that the social media giant is committed to branching out.
As a down payment on this commitment, Facebook recently launched its first set of smart glasses. The glasses allow wearers to listen to music, take calls and share photos and videos across Facebook’s services using a companion app. However, the $299 glasses do not feature augmented reality, which the company has recently said they are at least five years away from delivering.
FB stock is sitting just below its 52-week high, but recent upward price movement suggests that investors may be catching up with the analysts. At least 15 analysts have boosted their price target for FB stock since the company delivered earnings.
About Meta Platforms
Meta Platforms, Inc engages in the development of products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and wearables worldwide. It operates in two segments, Family of Apps and Reality Labs. The Family of Apps segment offers Facebook, which enables people to share, discuss, discover, and connect with interests; Instagram, a community for sharing photos, videos, and private messages, as well as feed, stories, reels, video, live, and shops; Messenger, a messaging application for people to connect with friends, family, communities, and businesses across platforms and devices through text, audio, and video calls; and WhatsApp, a messaging application that is used by people and businesses to communicate and transact privately.
Read More - Current Price
- $565.52
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 37 Buy Ratings, 4 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $634.10 (12.1% Upside)
#2 - Apple (NASDAQ:AAPL)
Apple (NASDAQ: AAPL) is expected to enter the VR sector with a headset that is rumored to be “significantly lighter” than competitor models. Other features are said to include high-end displays, eye-tracking technology, and over a dozen cameras that will track hand movements and capture footage. And if rumors are true, this won’t be the only VR product that Apple will be introducing.
The headset won’t be on the market for at least another year and that may be delayed due to the current supply chain issues. You can accuse me of hyperbole, but investors have reason to believe it will be worth the wait. The company has a history of exceeding expectations.
And after its stock split in 2020, AAPL stock sets up as a fairly inexpensive stock in the tech sector. The stock is trading right about at its consensus price target, but is likely to move higher if the company makes good on its pledge to launch its next iPhone on time. That would make now a good time to enter a position.
About Apple
Apple Inc designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. The company offers iPhone, a line of smartphones; Mac, a line of personal computers; iPad, a line of multi-purpose tablets; and wearables, home, and accessories comprising AirPods, Apple TV, Apple Watch, Beats products, and HomePod.
Read More - Current Price
- $229.00
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 23 Buy Ratings, 11 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $235.25 (2.7% Upside)
#3 - Immersion Corporation (NASDAQ:IMMR)
Up until now, we’ve been focusing on established companies in the technology/gaming space. For risk-tolerant investors who are looking for a more speculative stock, Immersion Corporation (NASDAQ: IMMR) is a solid choice.
The key benefit to owning IMMR stock is that it’s a pure-play on virtual reality. The company’s sole focus is developing VR technologies. That means in addition to developing headsets and software that deliver a VR experience, they also deliver the technology that power systems such as touchscreens.
To that end, the company has over 3,200 patents that are either issued or pending. These serve as proprietary assets that give investors another reason to invest in the company.
The downside to this is that the company has found itself the target of lawsuits regarding its patents. And it appears that at one point, IMMR stock was caught up in the meme stock craze. However, if you’re looking for an inexpensive stock that has upside potential, Immersion could be an ideal choice.
About Immersion
Immersion Corporation, together with its subsidiaries, engages in the creation, design, development, and licensing of haptic technologies that allow people to use their sense of touch to engage with and experience various digital products in North America, Europe, and Asia. The company provides technology, patent, and combined licenses.
Read More - Current Price
- $8.32
- Consensus Rating
- Buy
- Ratings Breakdown
- 1 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $13.50 (62.3% Upside)
#4 - Unity Software (NYSE:U)
Unity Software (NYSE: U) is best known for its video game and software development. And as a video game stock, the company is a great stock to own. However, it has a separate business division that develops software for virtual reality devices. If you believe in such claims, Unity says that companies use its software to power their virtual reality games more than any other platform. This is particularly true with battle-related gaming.
So why not buy a great video game company that also lets you take advantage of the growing trend towards virtual reality? The company has only been publicly trading since September 30, 2020. Since then, U stock is up 53.6% and that’s actually down from its closing price of $153.47 on December 31, 2020.
Unity is not yet profitable, although in its last earnings report it showed marked progress towards that goal. And the company has been increasing its revenue every quarter since going public.
About Unity Software
Unity Software Inc operates a real-time 3D development platform. Its platform provides software solutions to create, run, and monetize interactive, real-time 2D and 3D content for mobile phones, tablets, PCs, consoles, and augmented and virtual reality devices. The company offers its solutions directly through its online store and field sales operations in North America, Denmark, Finland, the United Kingdom, Germany, Japan, China, Singapore, and South Korea, as well as indirectly through independent distributors and resellers worldwide.
Read More - Current Price
- $21.64
- Consensus Rating
- Hold
- Ratings Breakdown
- 6 Buy Ratings, 8 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $23.35 (7.9% Upside)
#5 - Nvidia (NASDAQ:NVDA)
A different way to invest in virtual reality is to look for the picks and shovel stocks. That is the companies that provide the crucial elements that make products a reality. And when it comes to VR/AR products, like many sectors, that means looking at semiconductor companies, and that’s a reason to consider Nvidia (NASDAQ: NVDA).
Nvidia is already among the leaders in developing the graphic processing units GPUs that are used by consumers and businesses. And when it comes to VR gaming, the need for processing power will be equally if not more important than the actual products.
After its 4-for-1 stock split in July 2021, NVDA stock is currently trading above its consensus price target. However, we are only at the beginning of what is going to be a multi-year movement. And Nvidia is an attractive stock for many sectors beyond virtual reality. So investors can look for the stock to pull back before taking a long position.
About NVIDIA
NVIDIA Corporation provides graphics and compute and networking solutions in the United States, Taiwan, China, Hong Kong, and internationally. The Graphics segment offers GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro/NVIDIA RTX GPUs for enterprise workstation graphics; virtual GPU or vGPU software for cloud-based visual and virtual computing; automotive platforms for infotainment systems; and Omniverse software for building and operating metaverse and 3D internet applications.
Read More - Current Price
- $145.89
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 40 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $154.63 (6.0% Upside)
#6 - Sony (NYSE:SNE)
One way to approach purchasing virtual reality stocks is to look for trends within the trend. When it comes to virtual reality stocks, instead of creating a metaverse, look to what already exists. By this I mean, role-playing game franchises that are driven by a storyline.
Which makes a case for Sony (NYSE: SNE) the world’s largest seller of video gaming consoles and the creator of exclusive gaming franchises such as God of War and The Last of Us. One competitive advantage that the company cites is the ability for game players to view the game in their headset while other players can view it on a TV screen.
The company already has a virtual reality headset in market with its Playstation VR. Sony released Playstation 5 in November 2020 and is expecting to sell 4 million systems this year. SNE stock is near the price target set by analysts. However, it’s about 10% below its 52-week high.
About Sony
Sony Corporation designs, develops, produces, and sells electronic equipment, instruments, and devices for the consumer, professional, and industrial markets worldwide. The company distributes software titles and add-on content through digital networks by Sony Interactive Entertainment; network services related to game, video, and music content; and home and portable game consoles, packaged software, and peripheral devices.
Read More - Current Price
- $18.92
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#7 - Lumentum Holdings (NASDAQ:LITE)
Another picks and shovel stock that rounds out our list of virtual reality stocks is Lumentum Holdings (NASDAQ: LITE). The company manufactures optical and photonic products. As it relates to virtual reality, Lumentum sells optical chips and 3D sensing chips and one of its key customers is Apple, which then uses the chips to introduce interactive VR features in its iconic iPhones.
As demand for virtual reality features increases so will the company’s customer base. In fact, this demand is the primary revenue driver for the business. This could be one reason for the volatility in LITE stock.
The stock is a favorite of the analyst community. Five analysts have boosted their price target for the stock since the company reported earnings on August 17. Part of the reason is the company’s guidance. Earnings are now expected to be in a range of $1.47 per share to $1.61 per share topping analysts' expectations for $1.45.
About Lumentum
Lumentum Holdings Inc manufactures and sells optical and photonic products in the Americas, the Asia-Pacific, Europe, the Middle East, and Africa. The company operates through two segments: Optical Communications (OpComms) and Commercial Lasers (Lasers). The OpComms segment offers components, modules, and subsystems that enable the transmission and transport of video, audio, and data over high-capacity fiber optic cables.
Read More - Current Price
- $82.47
- Consensus Rating
- Hold
- Ratings Breakdown
- 8 Buy Ratings, 3 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $74.85 (9.2% Downside)
One final thing to consider about virtual reality stocks is that this is still a niche industry. That’s reflected in the price of VR and AR devices which is still prohibitive for many consumers. And even as applications for this technology are growing, there are many more that have not been developed yet.
Do you know what that means? If the sector grows at anywhere near the CAGR that’s expected, VR and AR devices will become an entertainment staple in many homes.
Some of the stocks in this presentation are among the hottest in the tech sector. Others are pure plays and may feel more speculative. One way that you can even out your risk is to invest in an exchange-traded fund (ETF) that tracks companies in the sector.
Investors looking for such funds may consider the BlueStar Augmented and Virtual Reality Index which is made up of a modified equal-weight portfolio of companies whose products or services are largely tied to the development or commercialization of VR or AR technologies.
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