Metaverse stocks emerged with a bang a couple of years ago. In fact, Mark Zuckerberg even changed the name of his social media company to Meta Platforms (NASDAQ:META), cementing the idea that the metaverse would be the destination of the future.
And yet, there’s little sign of much follow-through on the concept today. So far, we have seen no killer app for augmented or virtual reality (AR, VR) that would entice the general public to become familiar with the technology.
A positive sign on the horizon, Apple (NASDAQ:AAPL) offers a new augmented reality platform. The metaverse idea is admittedly still in its early days, and the technology could enjoy a quantum leap forward. But, for now, metaverse stocks are a risky place to be, and these three in particular look like strong sells for September 2023.
Roblox (NYSE:RBLX) has been a popular metaverse stock. Roblox already has simultaneous users online, making it a logical place to launch a metaverse community.
However, it’s more difficult to prove the amount of appeal beyond its core audience of young users. Further, concerns exist regarding monetization and content moderation of a gaming ecosystem primarily used by minors. For example, investing newsletter The Bear Cave has published various reports detailing alleged shortcomings in Roblox’s protections for children that use Roblox.
More broadly, Roblox may be limited in ever being able to escape its box as a niche gaming ecosystem with rudimentary graphics. The firm continues to grow revenues at an acceptable rate, but its operating losses are ballooning. Roblox simply is not showing operational scale from its growth.
Even though Roblox has a modest devoted audience, it’s unlikely that Roblox can leap to being a mainstream mass-appeal gaming ecosystem. Given the shortcomings of Roblox’s graphics and game engine, the initial metaverse ambitions seem increasingly unlikely to be fulfilled.
Zedge (NYSEMKT:ZDGE) builds social digital marketplaces and competitive games. For example, it has the Zedge Ringtones and Wallpapers app that give access to a wide range of sounds, wallpapers, and emojis for social media.
Some analysts have pointed to Zedge as a potential winner in both artificial intelligence and the metaverse. Last year, Zedge introduced pAInt, a feature that allows users to turn text inputs into images. It’s easy to imagine the multiple ways in which art, wallpapers, and emojis could be used in a metaverse setting as well.
However, despite these potentially interesting features, the business has failed to gain much momentum. For fiscal Q3 2023, revenues grew just 8% to $6.7 million. With this tiny revenue base and modest growth rate, it will be a challenge to position itself as an AI and metaverse stock winner. Not surprisingly, the company has yet to become consistently profitable.
Vuzix (NASDAQ:VUZI) is a company attempting to commercialize smart glasses. These could be used for a variety of VR and AR applications including metaverse communications and gaming.
Vuzix rose to prominence in early 2021 when fund manager Cathie Wood’s Ark Invest started buying heavily into VUZI stock. At the time, traders were optimistic about Vuzix’s potential to create a reasonable business around its flagship product.
Unfortunately, this is failing to materialize. Over the past two years, revenues rose from merely $11.6 million in 2020 to $11.8 million for full-year 2022. So far, the metaverse and AR haven’t moved the needle for Vuzix.
Today, traders might think VUZI stock is a bargain after its big decline. Don’t let the low share price fool you. The company still has a market capitalization of nearly $250 million. That’s a huge figure for a firm with large operating losses, modest revenues, and minimal commercial traction.
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