Surging inflation and concerns over the Fed's aggressive interest rate increases to bring prices down have been driving massive stock market sell-offs. However, this could be an opportune time for investors who bet on a company’s long-term growth prospects based on its fundamental strengths and innovations. The metaverse has become one of the buzzwords in the tech sector due to its potential to drive the next big opportunity in the tech space. By 2025, 75% of tech industries are expected to incorporate the digitization of blockchain into their operations.
Furthermore, the metaverse’s evolution will increase demand for devices such as VR headsets, MR headsets, HUD, HMD, smart glasses, and smart helmets. Therefore, investing in the metaverse could be rewarding. The metaverse’s market size is projected to reach $426.9 billion by 2027, growing at a CAGR of 47.2%.
Given this backdrop, we think it could be wise to bet on fundamentally sound metaverse stocks Microsoft Corporation (MSFT), Cisco Systems, Inc. (CSCO), and Taiwan Semiconductor Manufacturing Company Limited (TSM) at their current price dips. These four stocks are held by the Global X Metaverse ETF.
Microsoft Corporation (MSFT)
MSFT in Redmond, Wash., develops, licenses, and supports software, services, devices, and solutions worldwide. The company has two segments–Productivity and Business Processes, which offers Office, Exchange, SharePoint, Microsoft Teams, Office 365 Security and Compliance, and Skype for Business, as well as related Client Access Licenses (CAL), Skype, Outlook.com, OneDrive, and LinkedIn; and Dynamics 365, a set of cloud-based and on-premises business solutions for organizations and enterprise divisions.
Recently, MSFT announced the general availability of the stand-alone version of Microsoft Defender for Business. Defender for Business brings enterprise-grade endpoint security to SMBs, including endpoint detection and response capabilities to protect against ransomware and other sophisticated cyber threats.
In March, MSFT announced advancements in cloud technologies for healthcare and life sciences with the general availability of Azure Health Data Services and updates to Microsoft Cloud for Healthcare. With its recent acquisition of Nuance Communications, Microsoft is well-positioned to expand an organization's ability to help others by leveraging trusted AI to address the biggest challenges transforming the future of healthcare for all.
Also, in March, MSFT completed its acquisition of Nuance Communications Inc. (NUAN), a leading conversational AI and ambient intelligence across industries that include healthcare, financial services, retail, and telecommunications. With a common vision to build outcomes by AI, Microsoft and Nuance should enable organizations across industries to speed up their business goals with security-focused, cloud-based solutions infused with powerful, vertically optimized AI.
During the third quarter, ended March 31, 2022, MSFT's total revenue increased 18.4% year-over-year to $49.36 billion. Its operating income grew 19.5% from its year-ago value to $20.36 billion, while its net income improved 8.2% from its prior-year quarter to $16.73 billion. The company's EPS rose 9.4% year-over-year to $2.22.
Analysts expect MSFT's revenue to increase 14.7% year-over-year to $52.93 billion for the fourth quarter, ending June 30, 2022. The company's EPS is expected to grow 8.6% year-over-year to $2.36 in the fourth quarter, ending June 30, 2022. Furthermore, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters. The company's shares have soared 5.8% in price over the past year.
MSFT's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
The stock also has a B grade for Sentiment, Stability, and Quality. Within the D-rated Software - Business Industry, it is ranked #11 of 57 stocks.
To see additional POWR Ratings for Growth, Value, and Momentum for MSFT, Click here.
Click here to check out our Software Industry Report for 2022
Note that MSFT is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.
Cisco Systems, Inc. (CSCO)
CSCO in San Jose, Calif., designs, manufactures, and sells Internet protocol-based networking and other products related to the communications and information technology industry in the Americas, Europe, the Middle East, Africa, the Asia Pacific, Japan, and China. It delivers infrastructure platforms, including networking technologies for switching, routing, wireless, and data center products.
CSCO's revenue increased 6% year-over-year to $12.72 billion for the second quarter, ending Jan. 29, 2022. Its operating income grew 8.2% from its year-ago value to $4.56 billion, while its non-GAAP net income amounted to $3.55 billion, up 5.5% from its prior-year quarter. The company's non-GAAP EPS grew 6.3% year-over-year to $0.84.
The $0.86 consensus EPS estimate for the third quarter, ending April 30, 2022, represents 3.9% year-over-year growth. Analysts expect its revenue to increase 4.2% year-over-year to $13.34 billion for the same period. In addition, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
CSCO's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Quality and a B for Sentiment and Stability. Within the B-rated Technology - Communication/Networking industry, it is ranked #6 of 53 stocks.
In total, we rate CSCO on eight distinct levels. Beyond what we have stated above, we have also given CSCO grades for Growth, Value, and Momentum. Get all the CSCO ratings here.
Taiwan Semiconductor Manufacturing Company Limited (TSM)
Headquartered in Hsinchu City, Taiwan, TSM manufactures, packages, tests, and sells integrated circuits and other semiconductor devices internationally. It offers complementary metal oxide silicon wafer fabrication processes to manufacture logic, mixed-signal, radiofrequency, and embedded memory semiconductors.
For the first quarter, ending March 31, 2022, TSM's net revenue increased 35.5% year-over-year to NTD491.08 billion ($16.52 billion). Its income from operations grew 48.7% from its year-ago value to NTD223.79 billion ($7.53 billion), while its net income improved 45.2% from its prior-year quarter to NTD202.87 billion ($6.83 billion). The company's EPS rose 45.1% year-over-year to NTD7.82.
Analysts expect TSM's revenue to increase 30.7% year-over-year to $17.41 billion for the second quarter, ending June 30, 2022. The company's EPS is expected to grow 57% year-over-year to $1.46 in the second quarter, ending June 30, 2022. Furthermore, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
It is no surprise that TSM has an overall B rating, which equates to Buy in our POWR Ratings system. TSM has an A grade for Quality and a B grade for Sentiment and Stability. In the B-rated Semiconductor & Wireless Chip industry, it is ranked #19 of 95 stocks
Click here to see the additional POWR Ratings for TSM (Growth, Momentum, and Value).
Click here to checkout our Semiconductor Industry Report for 2022
MSFT shares were trading at $256.57 per share on Thursday morning, down $3.98 (-1.53%). Year-to-date, MSFT has declined -23.55%, versus a -17.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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