Luxury stocks are gaining traction as their brands seek ways to enter the metaverse, which combines mixed reality (MR) with social gaming, e-commerce, and the blockchain. Many luxury names are increasingly investing in the metaverse to bolster their digital presence.
Analysts at Morgan Stanley (NYSE:MS) estimate that non-fungible tokens (NFTs) and social gaming could expand the total addressable market of luxury stocks by more than 10% in eight years, leading to additional sales that could reach $50 billion by 2030. The metaverse is also expected to boost industry earnings before interest and tax by around 25%.
In social gaming, players add luxury products to their online avatars to enhance their player image. However, the more significant opportunity lies in the NFT market, where luxury companies sell exclusive versions of their digital products.
With this in mind, here are three luxury stocks that look poised to profit from the metaverse in 2022:
Luxury stocks: Burberry Group (BURBY)
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52 week range: $21.45 – $32.17
Dividend Yield: 3.13%
Our first luxury stock comes from the other side of the Atlantic. The London-based Burberry sells apparel, fragrances, and fashion accessories globally.
In August 2021, the luxury brand partnered with Mythical Games. It has issued a vinyl NFT toy version of its signature Sharky B character. Burberry sold out all 750 NFT units within 30 seconds. In addition, the company recently revealed a 3D animation of its deer mascot for Singles’ Day in China.
Burberry released 2021 financial results in mid-January. Annual revenue was 2.34 billion pounds sterling, a decline of 11% year-over-year (YOY). Revenue increased in the Asia Pacific region by over 15%. However, rest of the world saw double-digit declines.
Burberry hovers around $22, down 17% over the past year. Shares are trading at 18.8times forward earnings and 2.95 times trailing sales. The 12-month median price forecast for Burberry stands at $29.82.
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52 week range: $60.72 – $93.44
Dividend Yield: 1.59%
Paris-based Kering is the second-largest luxury goods conglomerate worldwide. Several of its brands include Gucci, Alexander McQueen, Balenciaga, and Yves Saint Laurent.
Gucci has a collaboration with gaming platform Roblox (NYSE:RBLX), allowing players to purchase digital Gucci items within the game. A virtual Gucci purse was recently resold for more money than its real-world counterpart. In addition, Balenciaga has a partnership with Epic Games for in-game merchandise of the online game Fortnite.
Kering announced strong 2021 annual results on Feb. 17. Revenue increased 35% YOY to 17.64 billion euros. Management highlighted the record recurring operating income, which was up 60%.
Kering stock hovers around $61, up less than 1% over the past year. However, it’s down 24% year-to-date (YTD). Shares are trading at 20.4 times forward earnings and 4.52 times trailing sales.
Luxury Stocks: Ralph Lauren (RL)
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52 week range: $114.51 – $122.82
Dividend Yield: 2.14%
Our last stock is the 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 (NFT) elements to new collections. It has recently partnered with Roblox to launch The Ralph Lauren Winter Escape. Now, players purchase clothing to customize their avatars at virtual Polo Shops.
The luxury brand announced Q3 FY22 results on Feb. 3. Revenue increased 27% YOY to $1.8 billion. Adjusted net income came in at $218 million, or $2.94 per diluted share, up from $125 million, or $1.67 per diluted share, in the prior-year quarter. Cash and equivalents ended the period at $3 billion.
RL stock hovers at $130 territory, down 5% over the past 12 months. It’s down 3% YTD. Shares are trading at 14.5 times forward earnings and 1.7 times trailing sales. The 12-month median price forecast for Ralph Lauren stands at $143.50.
On the date of publication, Tezcan Gecgil 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.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.