Whatever happened to the metaverse? Before ChatGPT and AI came along to grab the new shiny tech crown, it was meant to be the future. To such an extent, Facebook even changed its name to Meta (META) in anticipation of it going mainstream.
Well, the opportunity hasn’t gone away. According to Baird analyst Colin Sebastian, by 2035, the global immersive reality market (e.g., extended reality, software, content, virtual real estate) is anticipated to climb to $1.2 trillion, rising from ~$90 billion at a ~24% CAGR (compound annual growth rate).
For its part, Meta is still banking on its success and has a big, related event coming up. The Connect conference will take place next week (September 27-28), a two-day virtual happening focused on AI and virtual, mixed and augmented realities with a keynote from CEO Mark Zuckerberg.
Considering all the cash and resources the social media giant has poured into its metaverse endeavors, Sebastian makes the case that investors “generally don’t like to hear about RL (Reality Lab) investments.”
“Last year,” notes the 5-star analyst, “Connect foreshadowed investor concerns around opex, and those worries could resurface ahead of 2024 opex/capex guidance — likely a near-term overhang.”
But the investment could pay off eventually. At the event, in addition to potential partnership updates (Microsoft), new content, possibly other hardware and accessories, details on the mixed reality strategy and how Meta plans to use virtual assistants (AI), the company should offer more info regarding the launch of the Meta Quest 3 VR headset (likely released on October 10).
With an expected “entry level” price point of $499, it will be considerably cheaper than Apple’s upcoming Vision Pro ($3,499), and with additional mixed reality capabilities, Sebastian thinks the launch should “increase demand for Meta’s device lineup.”
“Additionally,” Sebastian adds, “we believe Apple’s entrance into the XR (extended reality) market helps to validate Zuckerberg’s vision.” Investors, however, should brace themselves for “continued investment into RL (Reality Labs) going forward.”
All that business aside, with accelerating revenues and margins into 2024, Sebastian “continues to like the stock,” and, accordingly, maintained an Outperform (i.e., Buy) rating on the shares to go alongside a $355 price target. The figure makes room for gains of 18% from current levels. (To watch Sebastian’s track record, click here)
Elsewhere on the Street, the stock garners an additional 41 Buys and 2 Holds, all culminating in a Strong Buy consensus rating. Going by the $376.19 average target, a year from now, investors will be pocketing returns of 25%. (See Meta stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
