- Metaverse, the buzzy new concept billed as the future of the internet, is a big market opportunity.
- Facebook is the "most obvious" stock for investors who want exposure, according Morgan Stanley.
- They named four other stocks that stand to benefit from the metaverse revolution.
Facebook's rebrand to Meta announced in October pushed the metaverse into public consciousness seemingly overnight.
Since then, corporations big and small have been trying to capitalize on the buzz by announcing initiatives meant to broaden their businesses into the future of the internet, often described interchangeably with metaverse as Web3.
In a note published this month, Morgan Stanley analysts led by Brian Nowak predicted the metaverse will see a total addressable market of over $8 trillion, which includes real estate, core retail spend, autos, games, music, and restaurants.
"The addressable US consumer expenditure to monetize is large," the analysts said in a note last week.
And while the full metaverse adoption will be gradual, the analysts believe that "current digital media and e-commerce consumer offerings have never been more robust and are continually improving."
They also pointed to the average time American daily users spend consuming digital media, which now stands at almost 11 billion days per year. "These are metaverse hours to capture," they said.
Facebook, which the bank rates as overweight, is the most obvious stock to invest in, the analysts said.
"We remain positive FB primarily because of the still under-appreciated core business growth durability and free cash flow into 2022," they said despite the firm's estimated $13.6 billion investment in the metaverse in 2022."
"The extent to which FB has any success in building/monetizing a metaverse is all upside and would be another layer-cake of multi-year monetization," they added.
Here are four other stocks that stand to benefit from the metaverse revolution, according to Morgan Stanley.
1. Roblox, overweight
The analysts point to the advertising, sponsorship, and e-commerce opportunities for Roblox to better monetize its already highly engaged users. For now, each user spends an average of 156 minutes or almost three hours per day, multiplied by the 47 million daily active user base.
"Like FB, what we like most about RBLX is that the core growth and monetization algorithms (aging up, global growth, in-app spend) also remain strong."
2. Google, overweight
Google has leading traffic, compute power, engineering talent, and a growing focus on augmented reality, the analysts said. "If we believe in next generational platforms, they should not be dismissed."
3. Snap, overweight
Meanwhile, the analysts consider Snap a leader in augmented reality. "The extent to which augmented reality technologies are important in the metaverse could highlight value here," they added.
Snap, they said, continues to expand its use cases beyond core Snap, including Discover, Spotlight, and Maps. "We see SNAP ad revenue growing as its engaged and millennial audience is attractive to advertisers," they noted.
4. Unity Software, evenweight
As the most widely used engine in the video game industry, Unity Software is "uniquely positioned to enable the creation of 3D interactive content across a range of use cases," the analysts said.
"We see the engine as the beneficiary of a long-term secular adoption trend inside the video game industry, while the ad network could benefit from recent privacy changes in the mobile ad ecosystem."