Why Is Cathie Wood Buying Matterport? The metaverse is going to be huge. The concept itself was hardly a household name up until a few years ago, and yet the space is already estimated to be worth around $14.8 trillion, with no less a brand than Facebook renaming itself Meta Platforms (NASDAQ:FB) in anticipation of the enormous rewards the industry will bring.
One business that will surely thrive should the hype surrounding the metaverse come to fruition is spatial data firm Matterport (NASDAQ:MTTR).
The company’s focus is on digitally indexing the built environment, offering users a 3D data platform on which to build, design, operate and understand real-world spaces. Matterport creates so-called “digital twins” for its clients, capturing details such as depth and imagery with devices including iPhones and 360 degree cameras.
The company made the headlines in April when news broke that one of Cathie Wood’s investment funds – the ARK Autonomous Technology & Robotics ETF – purchased a 530,000 share stake in the spatial mapping firm.
That move shouldn’t have come as a surprise to those who’ve followed Wood’s career thus far – the Wall Street maverick tends to favor businesses such as MTTR’s i.e. those that are at the vanguard of some sort of disruptive movement within an industry.
Indeed, Cathie Wood has said herself that Matterport has the potential to “infiltrate…every sector”, and will be a big growth driver for the metaverse as a whole.
With that in mind, let’s take a closer look at what MTTR has to offer.
Matterport: A Business In Demand
In some ways, Matterport’s use case is practically unlimited. Its technology can be implemented in an almost infinite number of ways, and is only really limited by the creative imagination of the customers using it.
For example, once a 3D imprint of a building or room has been made, the options for embellishing the interior space are unbounded. This obviously has huge appeal for real estate agents wanting to present their properties in the most attractive light, although it also has relevance to lots of other industries too.
A key feature of MTTR’s business plan appears to be the development of a wide range of partner programs with firms that strengthen and shore up its prime offerings. In fact, Matterport has enterprise integrations with companies such as Autodesk, Verisk, Guidewire and Zillow.
Indeed, because of these integrations, numerous businesses in many diverse sectors are extracting value from Matterport’s platform products and services. For example, insurers can decrease risk and increase compliance more efficiently; construction contractors can streamline workflows and inspect sites remotely; while realtors can facilitate virtual leasing and engage prospective customers to a greater extent.
Source: Unsplash
Price Action and Valuation
Anyone who’s been following the stock market recently will know that growth firms like Matterport have had a hard time of it lately. For instance, the NASDAQ Composite Index – which is heavily weighted toward the technology sector – has seen its value decline almost 25 percent in the last six months, with younger, still expanding businesses faring even worse.
The scale of this retrace was never more apparent than with MTTR’s own price difficulties this past year. The company was flying high at the end of November with a stock price of $33 per share, but has since seen this fall to an all-time low of just under $5.
But coming off the back of an 82 percent de-rating, investors might be ready to give this stock another look. Yes, at over 11 percent short interest there’s still a substantial amount of pessimism surrounding Matterport right now, but it seems that Wall Street is increasingly bullish on the firm’s future prospects.
In fact, five out of seven analysts have the stock as a buy at the moment, with Morgan Stanley – who recently initiated coverage on MTTR – setting a price target of $9 for the company, noting that the business has an “underpenetrated opportunity” in the space.
So, what is it that analysts see in Matterport that’s got them excited for the stock once again?
The Future Is Bright For Matterport
Well, to begin with, that “underpenetrated opportunity” is enormous, with the company estimating it has a $240+ billion market in front of it ready to be harvested. Furthermore, still fewer than 1 percent of the world’s buildings have been digitally captured by either Matterport or any other business in the sector.
To put this into context, the global building stock, the largest asset class on earth, is worth $230 trillion, representing 4 billion buildings – and 20 billion spaces – just waiting to be digitized. At the present time, MTTR has a data trove of over 15 billion sq. ft of locations already mapped, a collection that is 100 times larger than that of the entire industry combined.
In addition to this, Matterport also demonstrated it can execute on its strategy for attracting, and retaining, its customers’ loyalty and interest. For example, the business grew its total subscriber count by 98 percent in the Fourth Quarter 2021, helping spur its revenues 15 percent to $27.1 million.
More significantly, however, is the fact that MTTR managed to get its recurring subscription revenue up to 61 percent of its total sales for the quarter, with its annualized recurring revenue also breaking records at $66.1 million.
But despite such strong progress being made on the revenue front, Matterport still has a problem with profitability.
Certainly, the business faced severe headwinds from the supply chain crisis, with issues arising from a lack of specialist imaging equipment serving to prevent the company from initiating new subscriptions on time. With that said, its trailing twelve month net income tanked the last two quarters, falling from an almost break-even loss of $(11.3) million in June 2021, to a disappointingly low of $(338.1) million today.
Is Matterport Still A Buy?
Despite the recent sharp decline in valuation, Matterport’s share price is still trading 10 times what its expected sales are for the coming year.
While this wouldn’t normally be a problem for a high growth company, MTTR’s total revenues have stopped accelerating at the blistering pace they once did, and investors are likely to be more cautious when it comes to paying a premium valuation just now.
However, Matterport is the clear leader in a compelling market, and its dominance in the field should ultimately win out. With the stock at historically low prices at the moment, there are certainly good reasons to open a position in this intriguing business while prices are still deflated.
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