Is Matterport Stock A Sell?

Matterport Inc (NASDAQ:MTTR) built a spatial computing platform that uses 360-degree cameras and rendering technology to create exact digital twins of physical spaces. The technology provides extremely accurate measurements and can create photorealistic virtual worlds. This makes it a key tool in industries like real estate, where buyers can tour a house digitally before they buy. 

Matterport has also signed been successful in collaborating with top brass technology firms. It inked strategic partnerships with two massive giants: Meta (NASDAQ:FB) and Amazon (NASDAQ:AMZN).

Wall Street analysts believe it will be a big play in the metaverse, which is one of the reasons the stock caught fire with hedge funds and retail traders alike.

Matterport’s 3D technology is becoming increasingly coveted, and its stock price doubled in twelve months as a result. But questions linger about whether the company can sustain a valuation of over $5 billion. Is Matterport overvalued and simply riding a wave of multiple expansion?

Quick View: What Is Matterport?

Matterport is a Sunnyvale, California-based company that is well positioned to play a big role in the coming metaverse.

It gives customers digital insights into real worlds. Another way of saying that is it provides actionable data about physical spaces, essentially doing for office buildings, retail, and even residential real estate what Google Maps did for our roadways.

The company enables 3D real estate tours, but it also allows people to visit major public attractions around the world, like museums, art galleries, monuments, and more.

This helped the company expand to over 400,000 subscribers in 170 countries across a diverse range of verticals; it currently has 6.2 million spaces under management.

It can be used for a wide range of use cases, but what’s most appealing to investors are the collaborations with technology titans. Partnerships with Meta (FB) and Amazon (AMZN) will make Matterport an increasingly important cornerstone of the metaverse.

Matterport, Meta & The Metaverse

When Meta CEO Mark Zuckerberg announced the company’s focus on the metaverse with a name change to Meta Platforms, it accompanied a partnership with Matterport. The collaboration releases 1,000 Matterport digital twins of residential, commercial, and civic spaces rendered from real-world counterparts.

This archive will help Facebook’s VR branch Oculus in developing the next generation of AI-powered digital worlds. And it’s not just virtual reality either – training its robots on this data could help to better understand what users are doing when interacting with the real world in our everyday lives.

The platform is available on Amazon’s AWS Marketplace too. This partnership fuels the AWS IoT TwinMaker, an enterprise solution leveraging the power of Matterport’s digital twins for the Internet of Things. This will be foundational in the creation of smart buildings that more easily integrate into smart cities.

The market’s growth potential has investors salivating for the stock, but the stock’s valuation could be a bit steep for more conservative investors.

Matterport Financial Outlook

Matterport traded at a market capitalization of over $5 billion towards the end of the most recent Q4. Still, it has plenty of good news to potentially sustain that valuation.

MTTR 3D capture technology is now available for free on over a billion Android mobile devices in 175 countries through the Google Play Store. It’s also partnering with a wide variety of companies across different industries from construction companies to luxury yacht builders and more.

Matterport subscriber count of 439,000 in the third quarter more than doubled year-over-year, which shows the company’s strong push into software over its traditional hardware revenue. This helped the company add over $600 million to its balance sheet and fueled a 10 percent year-over-year increase in total revenue.

Still, it posted a net loss of $177 million for the quarter, due to the heavy spending on acquisitions, research and development. The company has a cash pile of just under $150 million.

The company’s price-to-earnings ratio is a bit high for some investors, as it’s not entirely clear that the company can grow earnings fast enough to justify the multiple. But the opportunity is huge; it has a massive $240 billion addressable market.

Is Matterport’s Pivot A Concern?

Matterport’s pivot from 360-degree cameras into cloud-based software for converting 2D images into 3D spaces exposes the company to a lot of competition. It’s no longer necessary to use these expensive cameras, as a modern iPhone and Android device makes this powerful technology available to anybody.

And that means rival platforms like the 3D Home Tour from Zillow (NASDAQ:ZG) can eat into market share. There’s no shortage of apps on both mobile marketplace offering similar services to Matterport, and the widespread implementation of 3D-sensing cameras and LiDAR scanners in mobile devices could make business even tougher.

Still, its major partnerships and existing growth rate shows how successful the company has been in the space. Thanks to the health crisis, it’s already becoming more common to tour homes, stores, and popular physical attractions virtually. If this trend continues, the need for Matterport’s technology will grow.

The more we push towards this so-called metaverse, the more technologies like AR and VR will be implemented into everything we do. That’s going to make Matterport an important application for this infrastructure. But it’s not alone in its quest, and it needs to find ways to grow subscriber revenue by adding more value than the competition.

Is Matterport Stock a Sell: The Bottom Line

Matterport is a 3D rendering company that has hardware and software for creating digital twins of physical spaces. The company has high-end 360-degree cameras that are perfect for enterprise use, and its partnerships with Amazon and Meta make it an integral part of the coming metaverse.

However, it has an expensive price tag, and there’s no guarantee it will grow fast enough to justify its lofty P/E multiple. Even with the pivot into software, there is stiff competition. If you already own the stock, you could walk away with your money doubled, but the long-term prospects of Matterport make it a hold for many analysts.

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