Best Metaverse Action: Roblox Vs Unity Software

Investors can benefit in several ways from the meta-verse, a new technology trend aimed at connecting people who are anywhere on Earth, in a three-dimensional virtual world.

Roblox (RBLX -4.55%) and Device software (U -5.03%) are two companies that could help make the meta-verse a reality. Roblox provides a platform for developers to create, publish and operate 3D experiences and allows users to consume these experiences on different types of devices. Unity Software, on the other hand, enables developers, creators, artists, engineers, designers, and architects to create interactive 3D content in real time.

In simpler terms, Roblox and Unity Software are both pick and shovel games on the metaverse, as they are in the business of creating 3D content such as virtual worlds and digital twins. Which of these two metaverse stocks should you buy right now? Let’s find out.

People wearing virtual reality headsets lying on the ground in a circle.

Image Source: Getty Images.

The case of Roblox

The introduction of virtual 3D worlds is already having a positive effect on Roblox. The company had a strong 2021 with a turnover of 108% to $ 1.9 billion and daily active users up 40% to 45.5 million. In addition, the company’s daily active user base grew to 55 million in February, an increase of 28% year-on-year.

It is also worth noting that Roblox users spent 41.4 billion hours on its platform last year, an increase of 35% from the previous year. The company’s strong user base and commitment is why big names from musician David Guetta to the NFL use its platform to boost their presence in the meta-verse.

Meanwhile, the company’s virtual currency, known as Robux, is already hugely popular. Users can purchase Robux to upgrade their avatars in virtual worlds by using virtual currency to purchase in-game items that can range from clothing to accessories and even pets. Roblox users spent $ 2.7 billion last year buying Robux, which is reflected in the volume of the company’s bookings.

In total, Roblox’s ecosystem of 29 million developers, 11 million virtual experiences, a huge user base and a popular virtual currency make it an ideal platform for brands that want to break into the metaverse. Nikehas, for example, already created a virtual world on Roblox. Other brands like Forever 21, Vans and Ralph Lauren also utilized Roblox to roam into the metaverse.

Metaversen is expected to grow at an annual growth rate of 47% until 2029, according to a third-party estimate. So as more users enter the meta-verse, more companies will be encouraged to jump into the virtual world and expand Roblox’s addressable market. This explains why analysts expect Roblox to see impressive growth.

Chart of RBLX revenue estimates for the current fiscal year

RBLX revenue estimates for the current fiscal year given by YCharts

The case of Unity software

Unity Software is known for its Unity video game engine, which is used by developers to create games that work on different platforms such as computers, consoles and mobiles. Unity is now leveraging its gaming expertise in the meta-verse by focusing on creating 3D content in real time for various industries ranging from retail to architecture to the automotive industry to, among other things, creating digital twins.

The good part is that the company’s non-gaming business is gaining ground in an impressive way, indicating that it may already be taking advantage of the metaverse. Unity reported a 70% increase in non-gaming revenue in 2021. Unity management said at its corporate earnings conference in February that non-gaming accounted for 25% of the $ 326 million in revenue generated by the “creating solutions” segment “in 2021. By comparison, the non-gaming business generated 20% of revenue for the creative solutions segment by 2020.

Leading companies use Unity’s solutions to create digital twins – virtual 3D representations of real objects. South Korean giant Hyundai Motorshas, for example, partnered with Unity to create a digital twin of a real factory for use in its efforts to improve factory management, increase productivity and innovate the manufacturing process. In the meantime eBay uses Unity’s solutions to help “sellers present the actual product they offer with our proprietary interactive 360 ​​° view”.

There were a host of other partnerships that Unity management discussed during the company’s recent earnings conference, indicating that its 3D rendering solutions are being adopted across different industries. The adoption of Unity’s solutions should ideally grow stronger over time, as the meta-verse is expected to drive the demand for digital twins and other 3D applications. The digital twin market, for example, is expected to reach $ 48 billion in revenue by 2026, up from $ 3 billion by 2020.

Thus, Unity Software has a lot of room to increase its revenue. The company generated $ 1.1 billion in revenue last year, an increase of 44% over 2020. It also expects to maintain momentum in 2022, with revenue expected to increase by 35% in the middle of its indicative range to reach almost 1, $ 5 billion. In addition, analysts are optimistic about the company’s long-term outlook, as they expect its earnings to grow at an annual rate of 69% over the next five years.

But what is the best metaverse stock?

Roblox and Unity are growing at a good pace and seem to be taking advantage of the metaverse. But with a price / sales ratio of 11.1, Roblox is the most affordable choice for investors. Unity Software is much more expensive with 23 times sales, although it experienced a slower growth last year.

As such, investors looking for a relatively inexpensive metaverse stock might want to take a closer look at Roblox given its combination of better value and rapid growth.

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