Beware! 3 Metaverse Stocks Waving Massive Red Flags Right Now.

Stocks to sell

Metaverse stocks were the talk of the town for quite some time. So much so, that Mark Zuckerberg invested billions of dollars in the idea, and even changed the name of his social networking company, Facebook to Meta Platforms (NASDAQ:META). All with hopes the metaverse would be dominant. Nowadays, with the metaverse seemingly moved to the back burner, there are plenty of metaverse stocks to sell.

Analysts once noted the market could be worth $1.6 trillion by 2030. Even Matthew Ball, the CEO of venture capital firm Epyllion, once said the metaverse could create a $10 trillion to $30 trillion opportunity over the next decade. Even I thought the metaverse could catch fire with the world’s top companies and marketers investing billions in the idea, including Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOG, GOOGL), Apple (NASDAQ:AAPL), and Coca-Cola (NYSE:KO). Unfortunately, even Zuckerberg has put the metaverse idea on the back burner.

Our single largest investment is in advancing AI and building it into every one of our products. We have the infrastructure to do this at an unprecedented scale and I think the experiences it enables will be amazing. Our leading work building the metaverse and shaping the next generation of computing platforms also remains central to defining the future of social connection,” he said in a letter to employees.

That being said, investors may want to consider exiting these top metaverse stocks to sell.

Metaverse Stocks to Sell: Matterport (MTTR)

Since topping out around $3.80, special data company Matterport (NASDAQ:MTTR) has been a technical train wreck. Even now at $2.25, I wouldn’t touch the stock. Granted, recent earnings were impressive. The company’s quarterly revenue jumped about 39% year-over-year (YOY) to $39.6 million, which was near the high end of guidance. It also posted an adjusted net loss of 7 cents, which beat expectations for a loss of 8 cents. Even total subscriber numbers jumped 34% YOY to 827,000.

However, the company is now forecasting 0% to 5% YOY growth for the third quarter, which is well below expectations of 16%. For full-year 2023, MTTR also expects to see revenue growth of about 14% to 17%. But that’s also below expectations for 19.4%. While the company did try to add a positive spin, it’s not enough to keep growth investors interested. It makes the top of the list of the metaverse stocks to sell.

Vuzix (VUZI)

When the metaverse was expected to be a trillion-dollar market, shares of Vuzix (NASDAQ:VUZI) exploded from a low of about $4.10 to a high of $30.57. All as metaverse hopes drove investors to augmented reality (AR), virtual reality (VR), and all things metaverse. Now, VUZI fetches less than $4 a share, and it’s still not worth buying.

Granted, second-quarter sales jumped 56% YOY. However, profitability and cash flow numbers are nothing to write home about. GAAP earnings came in at negative $9 million, which was about a $1 million improvement YOY. Cash flow of negative $7.9 million was also the worst print since the fourth quarter of 2021. If the company can get its act together, perhaps there’s reason to get excited here. For now, with the red flags, I’d avoid it.

As InvestorPlace contributor Ian Bezek recently pointed out, “Today, traders might think VUZI stock is a bargain after its big decline. Don’t let the low share price fool you. The company still has a market capitalization of nearly $250 million. That’s a huge figure for a firm with large operating losses, modest revenues, and minimal commercial traction.”

Snap Inc. (SNAP)

Topping out around $83.34 in 2021, Snap (NYSE:SNAP) plummeted to a low of $9, where it’s been consolidating – and going nowhere – since mid-2022. Unfortunately, it’ll continue to go nowhere with mounting losses and growing competition. That and its poor outlook and weak user growth numbers aren’t helping much either, making it another one of the top metaverse stocks to sell.

For its third quarter, Snap expects to see 405 million to 406 million daily average users. That’s a significant slowdown from the second quarter, which saw an increase of 50 million, or growth of 14% YOY. The company also still sees a revenue decline in the third quarter with ad weakness. It’s also dealing with higher spending rates and lower profitability, which isn’t a good sign for the company. Those are enough red flags for any investor. Avoid the stock.

On the date of publication, Ian Cooper did not hold (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.

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