Meta Platforms (FB) has been one of my favorite investments for quite some time. While the company has been the subject of great scrutiny over the years, its growth and financials remain robust, and its $58 billion cash pile and $0 long-term debt position are great. At the same time, the stock has remained consistently cheap, which should allow management’s growing stock repurchases to deliver fantastic shareholder value creation going forward.
Besides for Meta’s core investment case, however, which includes all its current profitable platforms, I am eager regarding Meta’s metaverse potential, which in my view, is underrated by investors currently. In fact, I believe that Meta is one of the top Metaverse stocks out there. I am bullish on the stock.
What About the Metaverse?
Most investors do not really know what to think about the metaverse. People are probably imagining someone with a VR helmet on their head, similar to the images in the Ready Player One movie. Indeed, this is partially an element of the metaverse experience, but the metaverse as a whole is rather more mixed and, surprisingly to many, already here to some extent.
Most individuals spend innumerable hours in front of their screens nowadays, and their virtual possessions are gradually becoming the new social currency. This is similar to when gamers buy virtual items in video games to show their friends. It is no different than wearing luxury brands in real life. It’s a type of expression and communication.
To understand why the metaverse is not just going to be an essential aspect of our lives but also a very profitable field for companies in the space such as Meta, you just have to integrate people’s real-life behavior into the metaverse. For example, people will likely spend lots of money on their virtual character wearing certain brands. Does this sound absurd? Not really, since this is already happening.
Gamers are paying lots of money to buy skins for their virtual characters in video games. It only makes sense, then, that people in the metaverse will be spending way more on the avatar that resembles their real-life personality.
When we add NFTs to the mix, the potential of the metaverse gets outlandish. In real life, your car, your house, and the clothes you wear reveal something about your personality. In the same manner, your NFT assets in the metaverse will reveal a lot about who you are. This time, however, it’s not just your neighbors and co-workers who have visible access to you, but the rest of the world too. Accessibility and transparency are crucial in the metaverse, and in my view, this will basically determine people’s spending habits, and as an extension, grow the bottom line of Meta at some point.
To guess the financial influence the metaverse will have on Meta in the future would be irrational. That said, we can easily speculate on potential sources of revenue for Meta, including additional advertising, brand deals, royalties from smart contracts through NFTs, and many others. Nobody can forecast how these catalysts will appear in Meta’s actual numbers, but note that Meta already has the most prominent infrastructure amongst companies in the field, allowing it to execute on this upcoming trend successfully.
Wall Street’s Take
Turning to Wall Street, Meta Platforms has a Strong Buy consensus rating, based on 28 Buys and five Holds assigned in the past three months. At $409, the average Meta Platforms stock price prediction implies 24.67% upside potential.
Conclusion
Regardless of the metaverse’s future benefits for Meta Platforms, the company is already attractive very attractively priced, with its core operations appearing to have momentous upside potential going forward.
Simultaneously, however, I believe the company features a significant long-term upside potential from the metaverse story, which in my view, poses an inevitable shift towards social media 2.0.
Disclosure: On the date of publication, Nikolaos Sismanis had a beneficial long position in the shares of Facebook through stock ownership.
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