Matterport (NASDAQ:MTTR) stock has been one of the more volatile stocks in the market in the past few months. The investor enthusiasm has ebbed and flowed for MTTR stock, which could potentially become a leading metaverse stock down the line. The company is still finding its footing, but its stock trades at a valuation that just can’t be justified at this point.
Matterport is one of the top 3D spatial data platforms. Its software is used to build 3D models of physical spaces. Its use is predominantly in the real-estate sector, where it can produce virtual walk-throughs of houses of different sizes and office spaces. The platform offers a smartphone app that can digitalize real environments.
Of late, investors are driving up its stock value as a potential metaverse play. It remains to be seen how big of an impact it may have in the metaverse realm, but the stock has clearly gotten ahead of itself. This is why it’s best to avoid MTTR stock at this time.
Matterport recently reported its lackluster third-quarter results, where its top-line grew by just 10% from the prior period. Moreover, it expects to generate $110 million in revenues for the remainder of the year, a $13 million drop from its previous guidance. This isn’t great news for a company that trades at over 30 times forward sales.
With its top-line growth slowing down, its path to profitability has become even more complicated. Operational expenses more than doubled during its third quarter, which pushed its losses over $170 million for the first nine months of 2021.
In terms of financial flexibility, the company isn’t too good either. Its $334 million earn-out liabilities dwarf its $148,853 million cash balance. Moreover, it had $18.5 million in cash outflows during the quarter.
Nevertheless, Matterport boasts a strong cash balance which it could use to realize its metaverse ambitions potentially. Moreover, subscription revenues are also positive, as they grew 36% during the third quarter to $16 million from the same period last year. Matterport’s product has genuine demand but is nowhere near what its shareholders hoped for.
Matterport’s management recently put out guidance where they believe the company should grow its sales at a 59% compound annual growth rate(CAGR) through 2025. That’s an incredible number that suggests how confident the management is about the company’s metaverse prospects.
However, it’s virtually impossible to get any clarity on what the opportunity holds for the company. The management believes the company is sitting on a $240 billion addressable market, which it has barely tapped into.
Considering its recent performance, it’s easy to be skeptical about the company’s long-term prospects. At the same time, MTTR stock continues to soar higher based purely on hype. Investors are hoping that it would grow into its lofty valuation, but at this point, it looks mighty unlikely.
The stock trades at over 30 times forward sales and an enterprise value to sales ratio of over 29 times. Such price metrics are far too rich for a company struggling to grow its top and bottom lines meaningfully.
Investor interest in Matterport has spiked as a potential long-term metaverse play in the past few months. Consequently, the stock now trades at a significantly high valuation which is hardly supported by its financials. T
he company’s operating performance has been unimpressive, and management estimates for its top-line growth appear to be highly unrealistic at this stage.
Hence, it’s tough to get excited about MTTR stock at this time.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.