Morgan Stanley Sees Facebook as Best Stock to Gain Exposure to the Metaverse

Bank sees around $5 trillion of consumer expenditure that could be digitized faster.

Nov 22, 2021 at 1:29 p.m. UTC
Updated Nov 22, 2021 at 3:50 p.m. UTC

The metaverse will likely be a “next-generation social media, streaming and gaming platform” and will operate initially as an advertising and e-commerce forum, according to a research note by Morgan Stanley published last week.

The “addressable U.S. consumer expenditure to monetize is large … at $8trln,” and the bank sees “~$5 [trillion] of consumer expenditure that could be digitized faster from more immersive experiences.”

Facebook (overweight rated) is the most obvious way to invest in the space, according to the report written by lead equities analyst Brian Nowak, and any success it has in building and monetizing the metaverse is “all upside and would be another layer-cake of multi-year monetization.”

In October, Facebook announced it was changing its corporate name to Meta, signaling its plan to refocus on the metaverse.

Nowak also said he favors the following companies with exposure to the metaverse theme: Roblox (overweight), Alphabet (overweight), Snap (overweight) and Unity Software (equal weight).

Adoption of the metaverse won’t be easy and will take some time, the note cautions, as existing digital media and e-commerce platforms are robust and improving all the time, which means that any metaverse will need to “partner to drive adoption.”

“American daily users already spend the total equivalent of ~11 [billion] days per year consuming digital media,” which are seen as “metaverse hours to capture,” the report says.

The metaverse has the potential to grow digital payments volumes but Morgan Stanley sees the revenue opportunity as smaller and occuring over the longer term, as the “challenge here is that the uncertain long-term regulatory environment around crypto creates more uncertainty about how large this monetization opportunity could be.”

UPDATE (Nov. 22 15:48 a.m.): Adds Facebook name change in the fourth paragraph.

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