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Metaverse Small Caps Poised After Goldman Sachs Points to $8 Trillion Upside

The metaverse theme has been percolating in the integumentary tissue of the market since Facebook changed its name to Meta Platforms Inc. (Nasdaq:FB) last October.

At this point, Wall Street has had enough time to put together reems of hard research-based analysis, which has recently started to poke above the surface of the information ocean in the form of concrete forecasts and projections about the metaverse investment opportunity ahead.

Goldman Sachs – “the smartest people in the room”, as they are often known on the Street – has started to gel behind an extremely bullish outlook on the theme.

In a recent podcast, “Exchanges at Goldman Sachs: Understanding the metaverse and web 3.0”, GS analyst Eric Sheridan explained the bank’s metaverse prediction, calling it an $8 trillion opportunity on the revenue and monetization side: 

“We look at the digital economy today, which is roughly about 20%, 25% of the global economy … We see the digital economy continuing to grow, and on top of that we see a virtual economy that will grow within and alongside this digital economy… That’s how we came up with the number for various outcomes of anywhere from $2 trillion to $12 trillion, with $8 trillion at the midpoint of all potential outcomes.”

A cursory look at heavily traded stocks with ties to the theme – Unity Software Inc. (NYSE:U), Roblox Corp. (NYSE:RBLX), NVIDIA Corp. (Nasdaq:NVDA), Snap Inc. (NYSE:SNAP), and Roundhill Ball Metaverse ETF (NYSEArca:METV) – suggests the market isn’t discounting anything like that growth potential or scale. 

With that in mind, we take a look below at some of the most interesting lesser-known small-cap names tethered to the metaverse theme.

Matterport Inc. (NASDAQ:MTTR) bills itself as a spatial data company that focuses on digitizing and indexing the built world. In other words, it has technology that helps to effectively import real-world structures into the metaverse, among other use cases.

The firm’s products include 3D content platform, pro2 3D camera, 360 cameras, virtual reality and mobile apps. It serves residential real estate, engineering and construction, travel and hospitality, and commercial real estate sectors. 

Matterport Inc. (Nasdaq:MTTR) recently announced, along with app developers AgentRelay and Boost3D, that the companies are using digital twins to change the way real estate businesses present properties for sale. Both developers use Matterport to create virtual 3D experiences for the real estate industry, enabling industry professionals to offer their clients a more immersive home buying experience.

“Companies across a wide range of sectors are recognizing the value of having high-quality, dimensionally-accurate digital twins to enhance how they conduct business,” said Bernard Nguyen, Senior Director of Business Strategy, Residential Real Estate at Matterport. “In real estate, our partners and customers continue to push the envelope to maximize the listing experience for their clientele. From agent-guided experiences that enrich the Matterport virtual experience with a narrative and live discussion throughout the tour, to video conference-enabled experiences to explore the Matterport spaces together with the agent on screen.”

The context for this announcement is a bit of a bid, with shares acting well over the past five days, up about 24% in that timeframe. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -20%. 

Matterport Inc. (NASDAQ:MTTR) saw $27.1 million in Q4 revenues, up 15% compared to fourth quarter of 2020. Subscription revenue was $16.5 million, up 32% compared to fourth quarter of 2020. Total subscribers increased to 503,000, up 98% year over year while Spaces Under Management (SUM) grew to 6.7 million, up 54%.

SFLMaven Inc. (OTC US:SFLM) is a traditional penny stock. But we put it in this basket because it doesn’t act like your typical OTC company – ie, full of big promises and no operational success. SFLM, by contrast, is EBITDA profitable and has pulled in nearly $150 million in sales over the past two decades as a dealer of high-end luxury vintage jewelry through its SFLMaven eBay store, where it has piled up over 100k positive reviews from customers.

However, the reason we discuss SFLM here is because the company is making a clear move into the metaverse to become the first native dealer of high-end vintage digital jewelry NFT items for avatar use in the metaverse. It could be a big deal, especially for a stock trading on a market cap of just $1.8 million.

SFLMaven Inc. (OTC US:SFLM) announced just this morning that it has now closed the acquisition of a real estate plot in Decentraland, which will be the home base for its virtual vintage jewelry NFT store.

“We believe many people will eventually become economic agents both in the physical world and in the metaverse, and most will be invested in their identity in both places,” stated Joseph Ladin, CEO of SFLMaven. “NFTs impose constraints on the proliferation of digital goods, which allows for value to emerge through scarcity. That means a heavy 14k yellow gold 44ct VS diamond cluster Cuban link chain necklace that we sell in the real world for $14,000 will also have enormous value in digital form for avatars to show off in Decentraland. We have now established our location, and we will soon take our metaverse store live and start dealing one-of-a-kind vintage treasures. We understand this transition and the opportunity it represents, and we believe SFLMaven is positioned to emerge as the leader in this bourgeoning space.”

Many major Wall Street houses, including Goldman Sachs, Bank of America, Morgan Stanley, and JPMorgan, have recently released research notes predicting the eventual mainstream adoption of metaverse participation across industries and consumer cohorts resulting in a new multi-trillion-dollar facet of the economy, which supports the company’s outlook.

Ladin added, “We have a great deal of conviction in the metaverse thesis, and we believe SFLMaven is now ahead of the curve in making this move, particularly in our industry and competitive landscape. It’s a bit like establishing an e-commerce footprint in 2003 – which we did, ahead of the crowd. We have booked nearly $150 million in jewelry sales since that time. And now we are ready for the next pivotal transition.”

SFLMaven Inc. (OTC US:SFLM) has also been posting organic growth in its real-world segment so far this year, racking up over $1 million in sales over the past four weeks, according to its weekly sales update press releases. That’s a pace that could drive 20% year-over-year growth in 2022 even before accounting for the added explosive potential of its new metaverse store.

Immersion Corp. (NASDAQ:IMMR) engages in the creation, design, development and licensing of patented haptic innovations and software. 

The firm offers touch sense platform and design services. It focuses on the following target application areas: mobile devices, wearable, consumer, mobile entertainment and other content, console gaming, automotive, medical, and commercial. 

Immersion Corp. (NASDAQ:IMMR) recently announced a partnership to integrate Immersion’s haptics technology into automotive interface solutions. Under the agreement, Immersion will license its Active Sensing™ technology and patents to Nissha.

“Nissha is excited to develop haptic enabled interface solutions for the automotive market,” said Kazuhiro Nishikawa, Vice President and Senior Director of Mobility Business Unit, Nissha. “Our partnership with Immersion provides us access to its industry leading technology and designs.”

The chart shows 9% piled on for shareholders of the name during the trailing week, but this action is running counter to the larger trend in the name. That said, IMMR has evidenced sudden upward volatility on many prior occasions. Furthermore, the company has witnessed a pop in interest, as transaction volume levels have recently pushed 12% above its longer-run average levels. It pays to take note of this fact due to the limited float size in the stock (of 29M shares). It’s something the veterans know to key on: a jump in average daily transaction volume in a stock with a restricted float can unleash fireworks as supply is squeezed.

Immersion Corp. (Nasdaq:IMMR) now commands a market cap of $177 million, with a significant war chest ($137.9M) of cash on the books, which must be weighed relative to about $16.6M in total current liabilities. One should also note that debt has been growing over recent quarters. IMMR is pulling in trailing 12-month revenues of $35.1M. However, the company is seeing declines on the top-line on a quarterly y/y basis, with revenues falling at -10.9%.

 

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