This Analyst Sees Nothing the “Matter” With Matterport’s Stock Price Decline

In a stock market where tech stocks have been destroyed over these past couple of months — and unprofitable tech stocks that began as “SPACs” suffered more than most — few stocks have suffered quite as much devastation as 3D “digitization” company Matterport (MTTR). Over the course of January, shares of Matterport got cut in half — down 53% — and February isn’t looking like it’s going to be a whole lot kinder to Matterport. Over just the first couple days of trading this month, Matterport is already down another 15%.

And yet, amidst all the selling, Deutsche Bank’s Bhavin Shah is sticking up for Matterport. The analyst initiated coverage of Matterport with a “buy” rating and a $14 price target that forecasts ~71% price growth in the stock over the course of the next 12 months. (To watch Bhavin’s track record, click here)

Why does Bhavin love Matterport? “We view the company as a leader in digitization of the built world — the largest asset class in the world that remains in the early innings of digital transformation,” explains Shah. Matterport’s technology allows users to capture 3D images of actual buildings and spaces, and transform them into “digital twins” of the real-world objects, such that they can be digitally walked around in, in virtual reality.

Admittedly, this is a new market. Outside of streamings of Ready Player One, chances are you don’t see a whole lot of people wearing virtual reality goggles very often. But the very nascence of the market is a plus in Shah’s view, giving Matterport the ability to grow off of an extremely tiny base, and compound revenues at a projected 52% annually over the next five years.

Helping to fuel Matterport’s growth is the company’s “freemium” business model, in which free users might sign up to use Matterport’s technology (for example, by 3D scanning their apartment using an iPhone app) to create a digital twin of their living space. Such a user might immediately find a practical use for this digital creation, and begin paying Matterport to use it (which would be great). Alternatively, said user might quickly lose interest in the idea, and not pay Matterport a cent.

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No matter, though. The user has still provided labor free of charge to Matterport, and gifted the company with a new digital design that “the company adds… to its Cortex AI spatial data library and [uses] improve the company’s algorithms.” Plus, the free user might return at a later date and become a paying user. And Matterport can use all the help it can get, building out its library. As Shah points out, “less than 1% of buildings [in the world have been] digitized to date.”

In terms of dollars and cents, Shah believes Matterport has struck upon a potential $240 billion idea (the total addressable market for virtual spaces). Currently, the company possesses only the merest fraction of this market — about $110 million in revenue last year. The analyst forecasts 48% revenue growth next year, however, 59% the year after that, and 43% more the year after that — so $369 million in 2024, or more than 3x growth in just three years.

In Shah’s opinion, that’s worth a “buy” rating for Matterport.

Turning now to the rest of the Street, other analysts are on the same page. With 4 Buys and no Holds or Sells, the word on the Street is that MTTR is a Strong Buy. Given its $27 average price target, upside of 232% could be in store for investors. (See MTTR stock forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.