Virtual reality (VR) is one of the hottest technologies catching the attention of the investing world at the moment. While this technology’s time seems to have come, it can still be difficult to decide which companies will be winners in this space.
Here’s what you need to know about investing in VR and four of the top virtual reality stocks to buy now.
Why Invest in VR Stocks?
Virtual reality is likely to be one of the up-and-coming high-growth technologies of the next several years. Between 2021 and 2024 alone, the VR market is expected to grow from $5 billion to $12 billion.
This, however, doesn’t take into account the technology’s applications in the metaverse. As metaverse platforms begin to take shape and play roles in the day-to-day lives of workers and consumers, we can reasonably expect an explosion in virtual reality technology to support it.
NVIDIA
Perhaps the single most promising VR stock is chip giant NVIDIA (NASDAQ:NVDA). As VR becomes a larger part of day-to-day life, advanced graphics processing units (GPUs) will be required in large quantities.
NVIDIA has a massive hold on the overall GPU market with 83 percent market share, putting it in a nearly unassailable position. As VR technologies continue to advance, it’s almost certain that growing demand for chips will strongly favor NVIDIA.
Q4 results demonstrated NVIDIA’s massive potential. The company produced $7.64 billion in quarterly revenues, up 53 percent year-over-year.
Revenue for the year rose by a total of 61 percent to $26.91 billion. Gross margin also reached 65.4 percent, showcasing NVIDIA’s excellent ability to capitalize on the revenues it produces.
Over the next 12 months, NVIDIA stock is forecast to rise from $214.96 to a median target of $350. This represents a gain of 62.8 percent. Interestingly, the lowest target price is $210, a loss of just 2.3 percent. This strongly suggests that NVIDIA is an asymmetrical risk with ample upside potential but a comparatively low downside.
Overall, NVIDIA is one of the strongest plays on the growth of VR technology. With a massive presence in GPUs, NVIDIA is sure to see huge growth in coming years as demand for graphics chips spikes.
Even if the company substantially misses the median target price, investors who buy today could see large gains over the next year. With that said, NVIDIA could also be a long-term option as VR and the metaverse take their place among consumer technologies.
Meta
Formerly Facebook, Meta Platforms (NASDAQ:FB) changed its name last year to reflect its new focus on metaverse technology.
Like many large tech companies, Meta has had a hard start to 2022, suffering a loss of 36.33 percent YTD. While concerning, this has also left the stock as a strong potential buy due to its newfound discount. The stock’s P/E ratio is currently just over 15, making it quite cheap for a high-growth tech stock.
Buying Meta stock is one of the best ways to invest in the metaverse, which could be worth $800 billion by 2024. The company has yet to fully reap the growth benefits of investing in the metaverse, but its core business lines allowed it to grow by 20 percent year-over-year in Q4.
As Meta’s VR investments pay off, this number could return to much higher levels.
Like NVIDIA, analyst forecasts suggest far more upside than downside for Meta in the coming 12 months. The stock currently trades at $214.11, and price forecasts give it a median target of $316. This would be a gain of 47.6 percent for the stock.
Provided the company returns to the growth levels it saw in the earlier days of its social media business, share prices could continue to trend much higher over the next several years.
Meta may take some time to reach its full potential, but the company is positioned extremely well to benefit from the growth of VR platforms for businesses and consumers.
Alphabet
Google parent company Alphabet (NASDAQ:GOOGL) has a long history with VR, having launched the early and ill-fated Google Glass headset in 2013. However, software will likely be the winning strategy for the company.
Alphabet is the company behind Android, the default platform for smartphones outside of the Apple line. As a result, its software will likely power most VR headsets.
Alphabet is on a strong growth trajectory at the moment, having beaten analyst expectations for both earnings and revenue in Q4. Overall revenue growth was 32 percent year-over-year. Growth in the company’s cloud computing segment was even higher at 45 percent.
Analyst price targets are also extremely favorable for Alphabet. The median target price is $3,500, a gain of 37.1 percent over the current price at the time of research.
Even more promising is the fact that the lowest estimate of $2,965 gives the stock a 16.1 percent upside. More so even than the other stocks on this list, these forecasts paint Alphabet as a safe investment over the next 12 months.
Alphabet also has the advantage of not being a pure play on VR. If the technology does gain a large foothold over the next few years, Alphabet will certainly benefit enormously. If not, the company’s other business lines will be able to support it. In either event, Alphabet is still a tech stock with the potential to produce large gains for investors.
Unity Software
While many of the top VR stocks are large, well-known companies, there’s at least one hidden gem that flies somewhat under the radar. This is Unity Software (NYSE:U), a company whose gaming engine makes it easier for developers and businesses to create their own VR product offerings.
As more businesses begin to enter the metaverse and explore VR projects, it’s very likely that Unity will be the platform of choice for building a virtual presence.
Unity’s recent growth numbers are impressive, with revenue increasing 43 percent year-over-year in Q4. More importantly, though, the company projects a long-term growth rate of approximately 30 percent. Assuming it hits this target, Unity could see ample share price growth over the next several years.
Price targets suggest that Unity could be riskier than the other stocks on this list. The U median target price of $147.5 would give the stock an upside of 63.8 percent over its current price. However, the lowest target is $63, representing a 30 percent loss. So, while Unity has a great deal of potential, it also could have more downside than the other three stocks listed above.
Because Unity’s software could one day become ubiquitous in the VR space, buying it now is a long-term play on the evolution of this technology.
As noted above, Unity presents a bit more risk than some other VR stocks. However, the potential for ongoing growth and the upside the company has over the next 12 months still make it a very appealing option at its current price.
Which VR Stock Is Best?
The overall best VR stock is most likely NVIDIA. This company has shown itself to be extremely robust, and its hold on the GPU market makes it a natural winner as VR technology advances. Without NVIDIA’s processors, the rest of the companies on this list will likely not be able to achieve their virtual reality goals.
With that said, each one of these stocks presents a compelling argument. Unity, in particular, represents a strong play on the software side of virtual reality. Meta’s planned metaverse platform will likely bring the technology into the everyday lives of consumers, while Alphabet offers a hedged bet on VR balanced with other, unrelated technology products. As a result, a VR portfolio consisting of a blend of these stocks has a great deal of merit.
#1 Stock For The Next 7 Days
When Financhill publishes its #1 stock, listen up. After all, the #1 stock is the cream of the crop, even when markets crash.
Financhill just revealed its top stock for investors right now... so there's no better time to claim your slice of the pie.
See The #1 Stock Now >>The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.