Perhaps one of the few silver linings of the otherwise awful coronavirus pandemic was that it provided a boost for the narrative undergirding the hottest virtual reality stocks. With government agencies mandating shelter-in-place policies, going the VR route represented an alternative to socialization. Nevertheless, the sector was already booming well before the global health crisis.
According to Grand View Research, the global VR market reached a valuation of $21.83 billion in 2021. Experts project that the sector will expand at a compound annual growth rate (CAGR) of 15% from 2022 to 2030. By the end of the forecasted period, the sector may bring in a revenue tally of $87 billion. Therefore, investors ought to target the hottest virtual reality stocks to own for next year and beyond.
A software and technology icon, Microsoft (NASDAQ:MSFT) simply fits well into almost any circumstance. While it’s technically listed under the broad tech category, MSFT doesn’t carry the typical volatility (this year aside) of the underlying sector. Rather, the company established itself as a staple within the global business ecosystem. For example, its Windows operating system commands a 75.1% market share among desktops.
However, MSFT really makes sense as one of the hottest virtual reality stocks to own. Fundamentally, it owns a major video game console system with the Xbox. Therefore, its VR accessories represent an organic business opportunity. And while Microsoft encountered antitrust pushback, it could potentially own Activision Blizzard (NASDAQ:ATVI). This too should help bolster Microsoft’s VR cred.
Most importantly in my view, the company enjoys solid financials. According to Gurufocus.com’s proprietary calculations for fair market value, MSFT rates as a modestly undervalued investment. As well, Microsoft carries a return on investment of 42.8%, reflecting a superior capacity to convert equity financing into profits.
Alphabet (GOOG, GOOGL)
Another all-around solid enterprise, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) already attracts contrarians for its value proposition. On a year-to-date basis, Alphabet shares dropped over 34% in equity value. While the present macro-environment doesn’t natively support tech firms, the discount is huge, considering that the company’s Google search engine utterly dominates the world market.
Commanding relevancies in both VR and augmented reality, Alphabet presently focuses on the educational component of immersive technologies. For instance, through Google Earth VR, users can explore fascinating places from all over the planet. As well, its technology delivers perspectives that you simply can’t get as a mere mortal tourist. Thus, it makes for one of the hottest virtual reality stocks to own.
Finally, Gurufocus.com’s FMV calculations identify Alphabet as a significantly undervalued investment. For me, I’m looking at the strength of its balance sheet, particularly its Altman Z-Score of 9.72. This indicates a very low risk of bankruptcy. As well, the company features an ROE of 26.6%, suggesting a high-quality business.
Meta Platforms (META)
To be completely fair, Meta Platforms (NASDAQ:META) has more than its fair share of downside threats. Primarily, META already hemorrhaged around 64% of market value. Further, management continues to double down on its bet regarding the metaverse or the next generation of connectivity solutions. For transparency’s sake, I’ve covered many stories regarding the harsh, high-level criticisms that Meta attracted for this commitment.
Still, if you’re a believer in the hottest virtual reality stocks, then it’s difficult to ignore Meta Platforms. It’s not just the devices themselves, with the company delivering several VR headsets and accessories. It also features smart glasses thanks to its partnership with Ray-Ban. But beyond that, Meta aims to be the leader in the metaverse. Therefore, these products are a means to a greater end.
Plus, we can’t forget that Meta owns Facebook, the biggest social media network in the world. True, management expressed concerns throughout this year about the digital advertisement slowdown. Still, enterprises need to advertise if they want to succeed. Arguably, there’s no better place to do it than on Facebook.
One of the powerhouses in the gaming arena, Nvidia (NASDAQ:NVDA) arguably generates the most attention for its graphics processing units. Powering some of the most intense applications, Nvidia’s GPUs represent the performance benchmark for professional gamers. In addition, its GPUs undergird multiple cryptocurrency-mining initiatives. Unfortunately, though, with the implosion of blockchain-related enterprises, NVDA took a massive hit.
Since the start of the year, NVDA gave up over 41% of its equity value. However, in the trailing month, shares gained 6%. Could this be the start of a bullish recovery? As one of the pioneers of VR technology, Nvidia enjoys relevancies across multiple industries. From gaming to video capture to cloud-based solutions, the company delivers meaningful applications.
Just as well, Nvidia represents a high-quality business. Specifically, it features strong profit margins, leading to a return on equity of 24.4%. This stat rates better than nearly 83% of the competition. It also reflects a superior capacity to convert equity financing into bottom-line expansion. Therefore, NVDA is worth a look among the hottest virtual reality stocks to buy.
Headquartered in San Diego, California, Qualcomm (NASDAQ:QCOM) is a multinational corporation specializing in the manufacturing of semiconductors, software, and services related to wireless technology. Per its corporate profile, Qualcomm owns critical patents tied to 5G, along with prior-generation mobile communication standards. Of course, with the malaise of 2022 imposing particular hardships on the tech space, QCOM stock enjoyed no reprieve.
Since the beginning of this year, QCOM gave up nearly 35% of its equity value. However, it’s starting to look a little bit more interesting. In the trailing five sessions, QCOM gained 2.5%. Leveraging its advanced Snapdragon semiconductor, Qualcomm powers far greater immersion in VR than was previously possible. In addition, the company carries relevancies for AR and mixed-reality solutions.
To be fair, Gurufocus.com warns that QCOM may be a possible value trap. However, it’s difficult to agree because of pandemic-fueled distortions. Fundamentally, Qualcomm enjoys revenue growth and profit margins that rank among the underlying sector’s top echelon. Therefore, for risk-tolerant contrarians, QCOM may be one of the hottest virtual reality stocks to own.
Previously one of the hottest stocks in general, Tencent (OTCMKTS:TCEHY) tends to draw intrigue no matter what the circumstances. Based in China, Tencent is a multinational technology and entertainment conglomerate. Per its public profile, it’s one of the highest-grossing multimedia companies in the world based on revenue. Unfortunately, fissures in the Chinese economy imposed hardships on TCEHY.
Since the January opener, Tencent shares gave up over 28% of their equity value. That said, it’s been rebounding sharply in recent sessions. In the past five days, it moved up almost 3%. In the trailing month, security gained nearly 13%. As Reuters noted earlier this year, Tencent plans to invest heavily in extended reality, creating unprecedented immersion in VR and AR applications.
For those willing to take a shot, Tencent enjoys a very high-quality business. Per Gurufocus.com, the company’s ROE stands at 22.6%, beating out nearly 82% of its rivals. Therefore, it ranks among the hottest virtual reality stocks to own.
For full disclosure, I’m not entirely sold on the idea of buying Roblox (NYSE:RBLX). With the company suffering severe losses in the equities sector, the free market has already spoken loud and clear. Nevertheless, if you’re dead set on acquiring the hottest virtual reality stocks, RBLX could make for intriguing speculation. But you do have to treat it as that, legal gambling.
Based in San Mateo, California, Roblox is a video game developer which specializes in a community-based endeavor. Essentially, the platform brings developers and users together in a constructive, family-friendly environment. As InvestorPlace contributor Ian Cooper argued, Roblox is “the closest thing to a mainstream social metaverse, with a mission of building a human co-experience platform that enables billions of users to come together to play, learn, communicate, explore and expand their friendships.”
I can dig that sentiment. Nevertheless, investors must recognize the financial realities of RBLX stock. Perhaps most notably, the market prices RBLX at nearly 47 times its book value. That’s above nearly 99% of the competition. Still, if the company meets its mission statement, RBLX could be one of the hottest virtual reality stocks to own.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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