In 2022, the idea of a massive online augmented or virtual reality gathering place became mainstream. We even saw Super Bowl ads devoted to the concept. A year later, however, enthusiasm has cooled and it’s time to sell these metaverse stocks to avoid in August.
As it would turn out, it is taking a while to develop the infrastructure and graphical capabilities to make the metaverse a useful real-life application. The technology and use cases will eventually get there, but right now, it seems many people put the cart before the horse.
With that being the case, many traders are selling these worst metaverse stocks for August and moving their capital to more promising opportunities. For these three metaverse stocks in particular, it seems that their share prices have much further to fall in the coming months.
Early on in the metaverse investment theme, Roblox (NYSE:RBLX) was a popular pick to take advantage of the trend.
However, as time marches forward, it’s becoming increasingly clear that Roblox is unlikely to be a long-term winner. Simply put, it appears to be more of a niche application rather than something that can conquer a mass market of video gamers. Roblox has struggled to expand its user base beyond children and teenagers. This is perhaps due to the low quality of Roblox’s graphics compared to the products of larger video game studios. This makes it one of those metaverse stocks to avoid in August.
Roblox’s most recent earnings report hammered this point home. The company’s operating loss widened badly. The firm’s bookings grew less than expected. Meanwhile, Roblox’s costs continue to soar. Roblox can keep dumping money into marketing, but it’s seemingly not generating sufficient returns on investment. In any case, Roblox appears unlikely to create a metaverse that will appeal to enough older users to ever become a broad societal phenomenon.
Social media network Snap (NYSE:SNAP) is still struggling to find a strong business model. SNAP stock has been public for quite a few years now, and shares have largely languished.
That’s likely because Snap hasn’t become consistently profitable. It has experimented with subscriptions and hardware to augment its core advertising platform, but little of it has stuck so far. Last month, SNAP stock plunged once again following yet another disappointing earnings report where revenues declined year-over-year and the firm reported a small loss on an earnings per share basis.
Snap can potentially become a significant play in the metaverse space. It is placing augmented reality applications into its camera platform. It can leverage its Spectacles hardware into metaverse usage as well. Given Snap’s inability to execute over the years, however, these metaverse ambitions might never amount to much. That’s especially true as Snap now appears to be pivoting toward AI applications, as well.
Cloud software company PTC (NASDAQ:PTC) is probably not the first thing most investors think of in the metaverse space. However, it is a holding in the Roundhill Ball Metaverse ETV (NYSEARCA:METV), and with justifiable reason.
That’s because, among its businesses, PTC operates Vuforia, which is a tool that helps enable the creation of augmented reality applications. In addition, PTC has Creo, a 3D computer-aided design (CAD) technology that helps companies with product design and development. Much of the potential around metaverse for industrial applications involves merging product design with virtual reality displays of a given factory or industrial space. All in all, it’s one of those metaverse stocks to avoid in August.
Unlike Roblox or Snap, PTC doesn’t have any pressing issues around its business model; PTC is profitable and has a well-established client base.
Here, valuation is the concern. PTC stock is up nearly 20% year-to-date. That’s even as analysts forecast just single-digit revenue growth and an outright drop in earnings. That makes PTC stock look awfully expensive at 33 times forward earnings.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.