3 luxury stocks to buy to take advantage of Metaverse Mania
Luxury stocks are gaining traction as their brands look for ways to enter the metaverse, which combines mixed reality (MR) with social gaming, e-commerce and blockchain. Many luxury names are increasingly investing in the metaverse to boost their digital presence.
The analysts of Morgan Stanley (NYSE:MRS) estimate that non-fungible tokens (NFTs) and social games could expand the total addressable market for luxury stocks by more than 10% in eight years, driving additional sales that could reach $50 billion by 2030. The metaverse is also expected to increase industry earnings before interest and taxes by approximately 25%.
In social games, gamers add luxuries to their online avatars to enhance their gamer image. However, the biggest opportunity lies in the NFT market, where luxury companies sell exclusive versions of their digital products.
With that in mind, here are three luxury stocks that look poised to profit from the metaverse in 2022:
- Burberry Group (OTCMKTS:BOURBY)
- Kering (OTCMKTS:PRUY)
- Ralph Lauren (NYSE:RL)
Luxury values: Burberry Group (BOURBY)
52 week range: $21.45 – $32.17
Dividend yield: 3.13%
Our first luxury stock comes from across the Atlantic. London-based Burberry sells clothing, fragrances and fashion accessories worldwide.
In August 2021, the luxury brand partnered with Mythical Games. He released an NFT vinyl toy version of his signature character Sharky B. Burberry sold all 750 NFT units in 30 seconds. Additionally, the company recently unveiled a 3D animation of its deer mascot for China’s Singles’ Day.
Burberry exits 2021 financial results in mid-January. Annual revenue was £2.34 billion, down 11% year-on-year (YOY). Revenue increased by more than 15% in the Asia-Pacific region. However, the rest of the world saw double-digit declines.
Burberry is hovering around $22, down 17% from a year ago. The shares are trading at 18.8 times forward earnings and 2.95 times trailing sales. The median 12-month price prediction for Burberry is $29.82.
52 week range: $60.72 – $93.44
Dividend yield: 1.59%
Paris-based Kering is the world’s second-largest luxury goods conglomerate. Several of its brands include Gucci, Alexander McQueen, Balenciaga and Yves Saint Laurent.
Gucci has a collaboration with the gaming platform Roblox (NYSE:RBLX), allowing players to purchase digital Gucci items in-game. A virtual Gucci handbag was recently resold for more money than its real-world counterpart. In addition, Balenciaga has a partnership with epic games for Fortnite online game products.
Kering announced loudly 2021 annual results February 17. Revenue increased 35% year-on-year to €17.64 billion. Management highlighted the record current operating profit, up 60%.
Kering shares are hovering around $61, up less than 1% from a year ago. However, it is down 24% since the start of the year (YTD). The shares are trading at 20.4 times forward earnings and 4.52 times trailing sales.
Luxury stocks: Ralph Lauren (RL)
52 week range: $114.51 – $122.82
Dividend yield: 2.14%
Our final stock is New York-based Ralph Lauren, another well-known domestic luxury brand. Its products include apparel, footwear, home products, fragrances and jewelry.
Ralph Lauren is adding non-fungible tokens (NFTs) to its new collections. It recently teamed up with Roblox to launch The Ralph Lauren Winter Escape. Now players buy clothes to customize their avatars in virtual polo shops.
The luxury brand announced FY22 Third Quarter Results February 3. Revenue increased 27% year-on-year to $1.8 billion. Adjusted net income was $218 million, or $2.94 per diluted share, compared to $125 million, or $1.67 per diluted share, in the prior year quarter. Cash and cash equivalents ended the period at $3 billion.
RL stock sits at $130, down 5% in the last 12 months. It is down 3% since the start of the year. The shares are trading at 14.5 times forward earnings and 1.7 times trailing sales. The median 12-month price prediction for Ralph Lauren is $143.50.
OAt the date of publication, Tezcan Gecgil did not hold (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.