Matterport Stock: Huge Opportunities Ahead (NASDAQ:MTTR)

Investment thesis

Matterport (NASDAQ: MTTR) is a leading spatial data company focused on digitizing and indexing the built world with its hardware and software. The company went public last year through a SPAC merger with Gores Contributions VI. The stock soared more than 200% from its SPAC price of $10 to over $30 as investors bet on its prime positioning for the metaverse. However, as the hype for the metaverse wanes, the stock has started to fall. It is now trading at ~$4, down more than 80% from its all-time high.

The Metaverse was never Matterport’s main marketplace in my opinion, it’s more of an unprecedented bonus. The company has always focused on the real estate and construction sector. I think Matterport has great potential because its spatial data is able to provide insights to businesses and individuals to better design, build, promote and manage their spaces. The TAM (total addressable market) for digitizing the physical world is estimated at $240 billion and Matterport’s current market capitalization is only around $1.5 billion, which leaves plenty of room for growth. . However, the valuation is still a bit stretched even after the decline, which is why I view the company as a hold at the current price.

RJ Pittman, CEO, on future opportunities:

“Real estate is the world’s largest asset class, currently valued at around $327 trillion, reflecting a $100 trillion increase in recent years as more than 15,000 new buildings are completed every day. Matterport leads the industry with over 7 million digital twins, and we’re creating thousands more every day, while 99% of buildings worldwide have yet to be digitized.This huge market opportunity is growing and growing. we remain focused on effectively scaling Matterport’s business to meet the growing global demand for software-driven property management.

Introduction

Matterport was founded in California in 2011. It is the leading spatial data company that allows users to turn physical buildings into digital buildings and the process is easier than ever. Anyone can transform a physical space into an accurate and immersive digital twin that can be used to design, build, operate, promote and understand.

Matterport requires a device to capture the image of dedicated spaces. Then, with the image, you can choose a subscription plan that includes free, beginner, professional, and enterprise.

Free

• 1 active user and active space allowed
• Capable of viewing images on the cloud
• Able to upload photos and videos
• Able to take action

Hall

• 1 active user with 5 active spaces
• Feature of the plan above
• Can be shared and embedded anywhere
• Publish Google Street View for free for a limited time
• Basic space traffic analysis

Professional

• 5 active users and 25 active spaces
• Feature of the plan above
• Small team collaboration
• Auto face blur
• Schematic floor plans and technical file (on request with supplement)

Company

• 20 users with 100 active spaces
• Feature of the plan above
• Great team collaboration
• Account management
• Export traffic report

Devices currently supported by Matterport are mobile phones, 360 cameras, Matterport Pro 2, and Leica BLK360, with each hardware having different capabilities. iPhone, iPad and 360 cameras are generally aimed at home users to access fast, portable and entry-level 3D scanning. Both devices have similar capabilities, except 360 cameras allow you to scan more rooms and spaces and have higher quality images and portability.

For example, 360 cameras can be used to capture small homes, condos, and apartments for rent or sale. Matterport Pro 2 offers the highest quality 3D scans with unlimited 4K photography and long battery life for multiple scans, while the Leica BLK360 has similar capabilities with the highest precision available. Both of these cameras are suitable for large scanning spaces such as hotels and commercial buildings.

Why Matterport?

Matterport Capture lets you capture the space with the devices mentioned above. Once Matterport Cloud has created the digital twin, users can edit their spaces in the Matterport workbench. It has different capabilities such as labeling rooms, measuring spaces, selecting 4K quality photos, customizing a VR experience, and inviting collaborators to view, download, and edit the space. Then, using Matterport Showcase, users and their audience can see and explore the space in its final format. It allows users to explore space in different formats and experience space in VR format if they have a compatible device such as Oculus. This is why Matterport can play an important role in the metaverse as it builds the bridge between the real world and the virtual world.

Matterport enables industries like real estate, hospitality, and construction to work more efficiently. Digital twins (spaced out as Matterport captured) are very useful in architecture, engineering, and construction because they can store critical information such as building plans, exact measurements, and the status of specific projects. This allows companies to collaborate, design and plan easily. In real estate and the hotel industry, the digital twin enriches the experience of visits to the spaces of the property by potential customers without having to invite them to come to the real site, which makes it much easier to make purchases or rentals.

Finances and evaluation

Matterport recently announced its first quarter results for FY22. The company reported total revenue of $28.5 million, up 6% from the first quarter of 2021. Subscription revenue was $17.1 million from $13.8 million, up 24% YoY (year-over-year). It now represents approximately 60% of total turnover. ARR (annualized recurring revenue) is now $86.8 million. The company sees strong engagement for the quarter, with total subscribers up 70% year-over-year to 562,000. While SUM (spaces under management) increased 49% to 7.3 million. Full-year 2022 revenue forecast is expected to be between $125 million and $135 million, while subscription revenue is expected to be between $80 million and $82 million, representing continued strong growth of 31 % to 34%.

However, the company’s net income remains weak. The operating loss went from minus ($2.4) million to minus ($84.9) million. This is largely attributable to increased R&D spending, which increased over 300% from $6 million to $26 million. Cash flow from operations went from positive $1 million to negative ($25.5) million. Non-GAAP EPS changed from negative ($0.01) to negative ($0.1). The company ended the quarter with a strong balance sheet. Cash was $600 million with no debt. This gives them a buffer to burn money and invest in the business.

RJ Pittman, CEO, on the first quarter results:

“We are pleased to report another strong quarter, growing our subscriber count by 70% to 562,000 subscribers for the period. We increased spaces under management by 49% to 7.3 million spaces. That’s 7.3 million Matterport digital twins of homes, offices, factories, hotels and more. One of our key strategic levers is subscription revenue, which grew 24% year-over-year, representing more than 60% of total revenue in the quarter, and continues to generate high and stable gross margins. Today, we are reaffirming our prior revenue and EPS guidance for 2022. With $600 million of cash on our balance sheet, we have the financial strength to navigate the macro environment and comfortably deliver on our growth plan. long term business.

It’s hard to assess Matterport using most traditional metrics because it’s still in grow-at-all-costs mode. Currently, the company is trading at an EV to forward sales ratio of 8.9, which is by no means cheap. In the chart below, you can see its valuation is roughly in line with other 3D software companies like Unity (U) and Autodesk (ADSK). Matterport is much less mature than these companies and also has much lower profitability. However, it has a huge untapped TAM which gives the company plenty of room to grow in the future. I think the current valuation is fair given the opportunity for Matterport.

Conclusion

In conclusion, Matterport has huge potential in my opinion. Despite its recent growth, the company is only touching the tip of the iceberg when it comes to its TAM (Total Addressable Market). Its spatial data will be very useful for the real estate and construction industry, the metaverse being a bonus. A large portion of Matterport’s subscribers and revenue comes from individual users, and the company is now focusing on target businesses, which opens up many more opportunities for growth. Some notable moves include his collaboration with Meta to enable AI research.

Matterport is growing rapidly with total subscribers up 70% year-over-year and SUM (spaces under management) up 49%. Its SUM is now 7.3 million with 22 billion square feet captured, 100 times larger than the rest of the market, creating a strong data advantage. Although the business is still not profitable, I think it is more important to gain market share and grow the business than to be prudent with R&D and S&M spending. It also has enough cash to maintain its current cash consumption. The current valuation is in line with similar software companies and I think the company is a buy as it is a unique high growth company with a huge TAM.