Vladimir_Timofeev/iStock via Getty Images
Matterport (MTTR) is one of the companies that have been linked with the Metaverse, since Meta Platforms, Inc. (FB) announced its ambition for the future of social media. MTTR provides the hardware and software for 3D capturing of physical spaces into digital twin spaces. A collaboration was announced between the two companies in 2021 for the Habitat-Matterport 3D Research Dataset (HM3D). In this collaboration, 1K of 3D digital spaces have been released to train AI systems in the virtual worlds based on physical spaces in the real world. Despite the current academic approach, we expect MTTR’s extensive library to be monetized for commercial and enterprise use in the Metaverse moving forward.
In addition, with the recent release of its app, Matterport for Android, we expect more to buy into its subscription service given the convenience of a smartphone 3D capture and the multiple benefits digital twins have to offer.
The Metaverse Of The Property Market Is Here
In January 2022, MTTR acquired Enview, a company that develops Artificial Intelligence for 3D spatial data analysis through object recognition and feature extraction. As a result, Matterport will be able to develop its next-generation spatial data analytics platform that provides powerful Machine Learning capabilities for the automated management of any physical space, while also enabling space planning for better operational efficiencies. As a testament to Enview’s technological relevance, multiple Fortune 500 energy companies have utilized its 3D AI platform nationwide for insurance purposes, disaster recovery applications.
In addition, MTTR announced a partnership with Midland Holdings, one of the leading real estate brokerages in China, Hong Kong, and Macau, for the 3D capture of its entire portfolio of residential properties. MTTR’s digital twin technology will allow Midland’s customers to view, buy, and rent properties without the need to be physically present. As a result, we may expect improved synergy for Midland moving forward, which reported annual revenues over $600M in FY2021. MTTR also stands to gain a long-term corporate partner in China’s massive property market.
The most exciting point for the partnership is the possibility to “virtually furnish or stage its properties, allowing customers to more easily visualize how an empty space can be used, and, if interested, customers can also purchase the furniture they see on a property through a virtual marketplace with just a single click.” The revolutionary approach to property sales/ rental may be easily replicated worldwide through MTTR’s technology, given the platform’s endless possibility.
Furthermore, the added e-commerce factor is highly similar to the virtual experience already seen in Roblox, another early iteration of the Metaverse. Many retailers, such as Nike, set up virtual stores selling virtual goods on the platform for Roblox users. In this case, instead of virtual offerings worn by avatars, the virtual furniture may be based on real-life collaborations with furnishing stores, which will supply the selected designs in the purchased/ rented homes.
It’s evident that the digital twin technology offered by MTTR will revolutionize the property purchase/rental and design experience moving forward. As a result of bridging the virtual and physical world, MTTR indeed has limitless potential in the future Metaverse application.
MTTR’s Revenue Growth Is Hindered By Global Supply Chain Issues
MTTR Revenue and Subscription
In the past two years, MTTR reported excellent revenue growth at a CAGR of 55.44%, from $46.01M in FY2019 to $111.17M in FY2021. Its FY2021 total revenues also represented a remarkable increase of 29.4% YoY. In addition, MTTR’s subscription revenues have seen a steady QoQ increase, from $7.5M in FQ1’20 to $16.5M in FQ4’21. Its total subscribers also increased to 503K, with an increase of 98% YoY. However, there’s an apparent deceleration in MTTR’s subscription revenue growth from FQ3’21 onwards. At the same time, its total quarterly revenues have also declined for two consecutive quarters, from $29.5M in FQ2’21 to $27.08M in FQ4’21.
MTTR reported excellent YoY growth for its free and paid subscriptions at 25% and 213%, respectively. However, its QoQ growth is not so impressive, given how the company has been affected by the global supply chain supply. MTTR recorded only an increase of 1.8% and 2% QoQ for its paid and free subscriptions, respectively. The slower growth is attributed to the inability to fulfill all of its consumers’ robust demand for the Pro2 3D Camera, which comes with paid SaaS subscription. Its Pro2 camera includes a critical chip component that is currently in global shortage, which has resulted in critical delays and overall reduced production for MTTR.
The comparison shows that though MTTR recorded notable YoY growth for subscription and services revenues, its product sales have suffered YoY and QoQ in FQ4’21. In addition, it had directly affected MTTR’s overall revenue growth, which had dramatically declined by -8.2% since FQ2’21. As a result, the company reported that it “entered the first quarter of 2022 with one of our largest backlogs ever. I believe that we could have seen year-over-year growth in our product revenue had we been able to satisfy all of the demand.”
MTTR estimated that supply chain constraints may begin to normalize by H2’22, though it expects a more balanced situation by 2023. As a result, despite its previous guidance on 50% annual revenue growth, we expect MTTR’s growth to be moderated in the next 12 months as the company tries to keep afloat during the supply chain issues. The company had tried to manage the issue by releasing Matterport for Android and Matterport Axis, which allows 3D capturing through iOS and Android smartphones, with higher accuracy and stability. As a result, we may expect to see continued growth for its subscription service, though it’s unknown if the demand for its 3D cameras will return after 12 months of delay.
Nonetheless, MTTR reported robust demand for its Matterport for Android, with over 200K app downloads from the Google Play Store in FQ4’21. Most of the downloads came from Europe, the Middle East, Africa, and the Asia Pacific region, representing the concentrated share for global Android users. In addition, it’s worth mentioning that Android users accounted for 75% of global smartphone users. As a result, we may expect another exponential growth in MTTR’s subscription growth from FQ1’22 onwards, similar to its previous growth after the launch of Matterport for iPhone.
For FQ1’22, MTTR guided for revenues in the range of $25.5M to $27.5M, representing a further decline of its overall revenue growth by -5.8%. Nonetheless, with the guidance of $17.1M to $17.4M of the subscription revenue, it will represent an increase of 5.4% QoQ. Moving forward, we expect a steady rise in its subscription user base as more sign up for its services through Android, which will help to boost its subscription revenue over time.
So, Is MTTR Stock A Buy?
MTTR Projected Revenue & EBITDA Margin
In the next two years, MTTR is expected to report excellent revenue growth at a CAGR of 53.52%. However, for FY2022, MTTR guided annual revenues in the range of $125M to $135M, lower than consensus estimates of $160M. Investors who add now must also be aware that MTTR is not profitable yet and will only be EBITDA positive from FY2024 onwards due to its massive research and development expenses. However, we still expect decent growth moving forward given MTTR’s guidance of 34% YoY subscription revenue growth to $82M in FY2022.
MTTR is currently trading at an EV/NTM Revenue of 12.68x, lower than its historical mean of 32.76x. Consensus estimates also rate MTTR stock as attractive now, given its undervaluation and future impact on the Metaverse. Given the recent decline in tech stocks, MTTR also is trading at $7.92, near its 52 weeks low of $7.5. As a result, investors may use this opportunity to load up on MTTR stock.
Therefore, we rate MTTR stock as a Buy for speculative investors.
Read More Feedzy