Metaverse companies have had an excellent year. Coinbase shares grew the most

Stocks in the Metaverse index had an excellent year. Although 2022 might have seemed like a long-term stopping point for most of the tech stocks that make up the index, two particular events in 2023 decided to dispel that notion. The first major event was the sharp rise in Nvidia's stock in late May, when it was revealed that Nvidia had benefited so much from the current trend in artificial intelligence that its revenues were expected to be 50% higher than Wall Street analysts had estimated.* The second major news was the market's performance, specifically at the end of the year, when investors priced in central bank announcements that they would begin cutting interest rates through stock purchases. As a result, the value of the companies included in Wonderinterest Trading LTD's Metaverse index rose 106% in 2023, while the benchmark Nasdaq index, for example, gained 55%.* But let's take a closer look at the performance of the individual companies included in the Metaverse index.

Coinbase (0.3% share in the Metaverse Index)

Enables the buying, selling, transferring and storing of cryptocurrencies. The company's mission is to create an open financial system for the entire world and become the world's leading brand in cryptocurrency transfer. Coinbase caught its first rally early last year, doubling its value from $33 to $56 per share. In mid-June, BlackRock, one of the largest private funds with $9 trillion under management, filed for registration as one of the first exchange-traded funds (ETFs) for the bitcoin spot rate and designated Coinbase as its crypto asset manager. JPMorgan analysts wrote in a November report that Coinbase is among the companies that stand to benefit most from the launch of these ETFs. Coinbase's stock growth was among the highest ever in the previous year. In fact, at the end of the year, its growth approached 400% and it closed the year near $185 per share. This growth contrasts with the company's 86% loss in value in 2022. In addition to the link to these emerging ETFs, the company also benefited from the growth of bitcoin, which gained 150% in value.* With nearly half of the company's revenue coming from cryptocurrency custody fees, further value growth can be expected in 2024 due to higher demand for this type of asset. [1]

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Roblox (0.3% share in the Metaverse Index). 

Roblox is a gaming platform that provides the ability to play a wide variety of user-created games and also allows you to create your own games using the tools in Roblox Studio. The value of Roblox stock is up 64% in 2023, and the reasons for this growth make the stock increasingly attractive to buy.* The first pillar of growth was the addition of Roblox to Sony's PlayStation console, making it more accessible to mainstream gamers. The second pillar is the long-term steady growth in new players to an impressive 70 million players per day. The third pillar is the decline in operating costs. While Roblox has never had a problem generating revenue, investors have been primarily concerned about the inability to turn that revenue into profit. However, after building a new data center and setting developer fees, it could surprise investors with profits in the future.

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Qualcomm (1.8% of the Metaverse Index)

The multinational company is known for its involvement in the development and manufacturing of semiconductor devices and wireless telecommunications products. It also completes the top three most undervalued stocks in the Metaverse Inedx Index. The value development of this company in 2023 could be described as growth in the opening and closing years. The company's stock started the year at the bottom of the chart at $107 and ended the year at approximately $145 per share. Overall, we're talking about a 32% increase.* Qualcomm has a strong chance of outperforming historical averages over the next five years, thanks in large part to its leadership in the mobile segment, which accounts for a significant portion of its revenue. While there are no guarantees, Qualcomm's resilience in this area and its ability to grow rapidly during favorable conditions could contribute to positive results for shareholders once market conditions improve. As a result, Qualcomm may be a good alternative for investing in long-term portfolios this year. However, its considerable cyclicality requires appropriate timing of purchases, which may occur later this year. [2]

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Alphabet (20.6% of the Metaverse Index)

Google's parent company is a multinational technology company focused on online advertising, search technology, cloud computing, computer software, e-commerce and artificial intelligence. Thanks in part to the rally associated with the advent of artificial intelligence, the tech giant's stock is up 55%. The company has also seen much steadier growth spread throughout the year thanks to a significantly higher market capitalization. The stock started at around $90 last year and ended the year at $140 per share.* Google's subsidiary, however, is not focused purely on artificial intelligence. Despite its significant investment in this area, its main sources of revenue are cloud, computing capacity, but mainly advertising sales. Some of its divisions may even be affected by the advent of AI, but this impact should be negligible. The success of YouTube and the Google search engine and their massive user bases have given Alphabet almost unlimited opportunities to profit from the $680 billion digital advertising market. While the industry faced some hurdles last year as macroeconomic issues limited other companies' ad spending, Alphabet's third-quarter 2023 results suggest that the worst of the lingering market downturns are behind us. Therefore, 2024 could be a very interesting year for this relatively "diversified" company.

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Amazon (17.7% share in the Metaverse Index)

Amazon is an internet retailer and web services provider. The company offers everyday consumer products. In addition, it provides various services, including cloud computing through Amazon Web Services (AWS) and digital streaming through Amazon Prime Video. Amazon has become one of the largest e-commerce and technology companies in the world. Last year, the company's stock value rose from $85 to $155, an 80% increase. Amazon has seen accelerating revenue trends over the year, which is one of the main reasons for investors to include this stock in their portfolio. Sales grew 13% in the third quarter, compared to 11% in the second quarter and 9% in the first quarter.* Wall Street likes the accelerating sales growth, especially in an industry that generates more than $500 billion in annual sales. But more than half of Amazon's business now lies in web services. In the third quarter of last year alone, that segment grew 18%.* Here, too, Amazon wants to come up with its own artificial intelligence software that could grow the industry, revenue and profits, and its stock price even faster next year. Like Google, Amazon is a relatively well-diversified company that has the potential to grow well into 2024. [3]

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Microsoft (32.3% stake in the Metaverse Index).

It is the first of a trio of companies that are embracing artificial intelligence and also benefiting significantly from it. Microsoft develops and sells software, services and hardware. The company's stock has risen from $240 to $375 per share over the past year. This 56% increase meant that the company briefly overtook another tech giant, Apple, as the most valuable company in the market. Diversification within Microsoft's business makes it far less vulnerable to macroeconomic woes than some of its other competitors. This is also why it achieved significantly higher quarterly revenue growth in 2023 than many of its competitors, despite adverse market conditions. In the third quarter of 2023, Microsoft posted 13% year-over-year revenue growth, beating analysts' expectations by nearly $2 billion. The company benefited from 13% revenue growth in its productivity segment and 19% revenue growth in its cloud business.* Microsoft is rapidly expanding in several areas of its business and technology, including artificial intelligence, most notably through its $13 billion investment in OpenAI, the company behind the best-known chatbot Chat-GPT. Its free cash flow and P/E (price to earnings) ratio do not make it the cheapest company, but these metrics are more positive compared to its competitors. For this reason, Microsoft is undoubtedly in for a very interesting year.

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Meta Platforms (10.9% of the Metaverse Index)

Facebook renamed itself Meta Platforms to pave the way for the Internet's successor in the form of a digital world known as the "Metaverse," which includes virtual reality (VR), augmented reality (AR) and digital infrastructure backed by decentralized technologies such as cryptocurrencies and blockchain. All based on artificial intelligence and the company's core business of selling advertising. The stock price rose 178% in 2023, from $125 to $355, and the company grew throughout the year.* Despite the almost negligible revenue from the virtual reality development division, which is many times smaller than the investment in this area, advertising revenue has produced unprecedented numbers. These were behind the tripling of the share price in the previous year. But Meta and its CEO Mark Zuckerberg are willing to spend so much money to create the Metaverse for a specific reason, and the company's leadership is clear about the role this segment should play in Meta's long-term success. Wall Street analysts are also very bullish on Meta stock with a consensus rating of "strong buy." Of the 38 analysts following the stock, a full 34 rate it as such. The stock's average price target of $361.65 is 16.8% higher than its current price. [4]

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Nvidia (share in Metaverse Index is at 16.2%)

Nvidia was undoubtedly the headline story of 2023. A phenomenal 239% increase determined that the entire year was a year of growth, with a focus on artificial intelligence. The company's stock jumped from $140 to $480 per share. Nvidia beat estimates in its first quarter earnings report and stunned investors with its outlook, predicting up to $11 billion in revenue for the second quarter. The company reported revenue of $7.2 billion, while analysts were at $7.2 billion. The market reacted to the news with a 24% jump in shares on May 25, and Nvidia beat expectations in its next two earnings reports as its growth momentum continued to accelerate. Second-quarter sales rose 101% from the same period a year earlier to $13.5 billion, well ahead of the company's guidance, and net income rose more than 800% to $6.2 billion. In the third quarter, the results were even more impressive, with sales rising to $18.1 billion and net income reaching $9.2 billion, more than 13 times the previous year's figure.* There is still a shortage of Nvidia products on the market, and the company appears to have a significant technological edge over its competitors. This should weigh in the stock's favor, and the shares appear surprisingly affordable with a price-to-earnings (P/E) ratio of 27 for next year. AI stock therefore looks like a good bet for further growth in 2024.[5]

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All of the stocks in the Metaverse index have risen by tens to hundreds of percent. The end of the year, when investors tuned into a positive mood thanks to the announced start of interest rate cuts, sent a positive signal to the markets. At the same time, this sentiment has carried over into early 2024, and barring a major market turnaround, we can expect technology companies to reap further gains this year.

Olivia Lacenova, principal analyst at Wonderinterest Trading Ltd.

* Past performance is no guarantee of future results.

[1,2,3,4,5] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or the current economic environment, which may change. Such statements are not guarantees of future results. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.

This text constitutes marketing communication. It is not any form of investment advice or investment research or an offer for any transactions in financial instrument. Its content does not take into consideration individual circumstances of the readers, their experience or financial situation. The past performance is not a guarantee or prediction of future results.

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