3 Stocks That Could Be the Next Big Thing in Virtual Reality

Ian Bezek

Sat, Mar 23, 2024, 4:00 AM 4 min read

There are possibilities for a full-on metaverse; a second place where people can meet, collaborate, and play games together. Increasingly, there is excitement around using virtual reality to enhance the everyday life and work experience as well. Apple’s new headset could push these uses into the mainstream and cause rapid consumer adoption. These virtual reality stocks stand to benefit.

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Unity Technologies (U)

In this photo illustration Unity Software Inc. (U stock) logo is seen on a mobile phone and a computer screen.

Source: viewimage / Shutterstock.com

Unity Technologies (NYSE:U) is a leading graphics engine. For almost 20 years, Unity has been building its namesake graphics ecosystem. Developers use Unity to create video games which work seamlessly across PCs, consoles, mobile phones, and augmented and virtual reality.

Unity has also worked on building out capabilities for its graphics engine in video animation, architecture and design, and e-commerce among other uses. With virtual reality built into headsets, it’s not hard to see how Unity’s graphics tools will serve a much wider marketplace going forward.

Unity shares crashed over the past two years amid a slowdown in the gaming industry. Many companies, including Unity, have engaged in mass layoffs to adjust to the industry’s new operating conditions.

However, revenue growth remains robust, with Unity growing the top-line from $542 million in 2019 to $2.2 billion in 2023. Now with more disciplined cost control, Unity is set to enjoy rapid profitability growth while benefitting from the growing virtual reality trend.

Tencent Holdings (TCEHY)

Source: Shutterstock

Tencent Holdings (OTCMKTS:TCEHY) is a Chinese conglomerate with holdings across various media, technology, and video gaming assets. This makes TCEHY stock a nice way to buy into a potential resurgence in the Chinese economy and equity market.

As it pertains to virtual reality, Tencent is a major game publishing studio in its own right, and it also has sizable ownership positions in firms such as Epic Games, Fromsoftware, and Supercell.

Its Epic investment, for example, should gain value as virtual reality takes off. Epic’s Unreal video game engine is the primary competitor to Unity and should enjoy many of the same trends as described above. Meanwhile, Epic controls intellectual properties such as Fortnite that have already created popular metaverses and are on the cutting edge of experimentation in enhanced reality experiences.

The fun thing about virtual reality is that it as adjacent to other emerging themes that can take off as well. For example, Tencent is a leading player in the growing e-sports trend, and it’s not hard to see how virtual reality could add to the e-sports experience as well, synergizing Tencent’s position in both markets.

Matterport (MTTR)

Illustrative Editorial of Matterport's (MTTR stock) website homepage. MATTERPORT logo visible on display screen.

Source: II.studio / Shutterstock.com

Matterport (NASDAQ:MTTR) is an information technology company focused on digitizing the real estate market.

Specifically, Matterport offers an integrated solution that allows landlords and property managers to create digital versions of their spaces. This allows real estate agents to give virtual tours of apartments, offices, and other commercial real estate to people without having to set foot at the property in person. Similarly, properties such as wedding venues, resorts, and the like can give prospective customers a virtual walkthrough.

Matterport has already demonstrated considerable success with its business model. It has $157 million in annualized run-rate revenues, with 38 billion square feet of managed properties and more than 938,000 subscribers.

Matterport is still struggling to reach consistent profitability. And there has been some uncertainty as the company refines its revenue model and strives for more recurring business rather than upfront sales. However, with a solid core product and a growing virtual reality market, MTTR stock should be set for a comeback.

On the date of publication, Ian Bezek held a long position in U stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.