People in tech believe the metaverse is the digital future, not hype. Venture capitalist Matthew Ball said the metaverse represented the fourth wave of computing. Besides an immersive experience in the virtual world, technologists expect it to upgrade social media platforms, enhance social interactions, and bring new business opportunities.
Facebook is the acknowledged metaverse pioneer after it changed its name to Meta Platforms Inc. on October 28, 2021. Fast forward to 2023, and big tech names like Apple, Amazon.com, Microsoft, and NVIDIA are engaging in metaverse development.
A bull run of metaverse stocks could be on the horizon, although investors should be wary of their selections. For Canadian investors, Shopify (TSX:SHOP) and POET Technologies (TSXV:PTK) are ready for a bull run. Both metaverse stocks are well-positioned to deliver far superior returns than their hefty year-to-date gains.
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High-quality business model
The superstar of TSX’s technology sector is shining bright again in 2023. Shopify was a top 30 growth stock (TSX30 List) in 2019 (rank two), 2020 (rank one), and 2021 (rank two) but dropped out last year. After posting an average return of 131.2%, it lost 74.8% in 2022.
However, the superstar and face of TSX’s technology sector is shining bright once more in 2023. At $71.98 per share, the tech stock is up 53.12% year to date. Market analysts have a 12-month average and high price targets of $84.24 (+27%) and $108.53 (+50.8%). Shopify peaked at $213.98 per share once in 2021.
A report by the $92 billion e-commerce platform reads, “Innovations that make the metaverse possible could give early adopters an edge over the competition.” The company adds that a seamless connection across different virtual environments is becoming increasingly important in modern commerce.
Shopify sees a developing trend wherein digital advancements revolutionize social media, and social media will take over commerce. It expects brands to rely heavily on social media to engage, convert, and achieve high customer retention. However, the challenge is maintaining its market position through a high-quality business model and the expansion of the global merchant base.
In the first six months of 2023, total revenues (subscription and merchant solutions) increased 28.1% year over year to US$3.2 billion. The net loss declined 53.6% to US$1.2 billion compared to the same period in 2022. Its President, Harley Finkelstein, said Shopify will focus on building the world’s best products to empower entrepreneurs and businesses everywhere and improve its ability to generate greater free cash flow.
Creative disruption
POET Technologies is a small fish compared to Shopify, but its growth potential is equally tremendous. This metaverse stock is flying high at $5 per share (+22.25% year to date). The $199.8 million company owns the POET Optical Interposer, reflecting its focus on creative disruption as it aims to become a global leader in chip-scale photonic solutions.
The novel platform technology seamlessly integrates electronic and photonic devices into a single multi-chip module. These devices are primarily used in high-growth areas of computing like artificial intelligence (AI), the Internet of Things (IoT), cloud services, data centres, and autonomous vehicles.
Top pick
Shopify is the top metaverse stock on the TSX, although POET Technologies is a cheap and potent alternative.
