The metaverse has been a hot topic for several years now. Ever since Facebook founder and CEO Mark Zuckerburg renamed his company to Meta Platforms (NASDAQ:META), investors have taken this concept seriously. We’ve seen Super Bowl ads and all sorts of other mainstream attention for the metaverse concept. Unfortunately for some, this has led to this list of metaverse stocks to sell.
And yet, Meta’s own Horizon Worlds appears to be a money-burning flop, at least to date. Whether it be issues with the technical hardware, a lack of glamorous metaverse applications, or simply consumer disinterest in the concept, virtual worlds haven’t taken off as expected.
That’s particularly bad news for these three metaverse stocks in particular. While it is too early to write off the concept entirely, investors should be extremely wary about these three metaverse stocks today.
Advanced Micro Devices (AMD)
Advanced Micro Devices (NASDAQ:AMD) has long been a story stock. While the company’s profits and fundamentals have been mediocre recently, traders have gravitated to AMD stock for a variety of narratives.
For a while, AMD purported to have an upside based on crypto mining. Lately, many folks are excited about AMD due to AI possibilities, even though AMD’s program there appears to be far behind that of Nvidia (NASDAQ:NVDA).
AMD also has gotten caught up in the hype cycle around the metaverse. In theory, AMD could make a lot of money selling graphics chips if the metaverse takes off and the big tech companies need far more computing power to operate all these virtual world applications.
In practice, however, there’s little evidence of broad metaverse adoption and scant reason to think it will improve AMD’s operating results shortly.
Social media company Snap (NYSE:SNAP) is a fascinating enterprise. Its focus on younger users and more image-driven messaging seemed like it could make for a significant player in its industry.
However, between operational issues and heavy competition, Snap has failed to deliver on that promise. The company is only marginally profitable, with a forward P/E ratio of more than 200. Meanwhile, revenue growth has stalled almost entirely, with the company on pace for less than 1% revenue growth for the full year 2023.
Snapchat is a leading innovator in virtual and augmented reality applications. If these take off, perhaps that will finally be the thing that helps Snap reach more mainstream adoption. However, CEO Evan Spiegel has been skeptical of Zuckerberg’s vision of the metaverse, and it seems virtual worlds won’t provide salvation for SNAP’s stock price anytime soon.
Roblox (NYSE:RBLX) is a leading gaming ecosystem. With its low-definition graphics and focus on user-generated content, Roblox has achieved a high adoption rate among younger users.
Roblox has a large virtual world, and it is one of the few that already has meaningful revenue generation with some mainstream brands and companies advertising there. This makes it seem like a logical thought that Roblox will become a triumphant player in the metaverse.
However, Roblox’s user base remains overwhelmingly young. This has led to issues, such as inappropriate content allegedly being shown to minors. In addition, it can be hard to build a mainstream and highly profitable platform primarily aimed at people under 18.
Roblox has grown revenues quickly. But there is little sign of operating scale. The company lost more than $1 billion last year. Analysts expect Roblox to remain loss-making through at least 2028. For now, Roblox’s virtual worlds aren’t turning into real-world profits or cash flow. This makes it one of those metaverse stocks to sell.
On the date of publication, Ian Bezek 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.