Jefferies says the metaverse will be 'biggest disruption humans have ever experienced.' How to play it

Published Mon, Dec 6 20212:19 PM EST

The metaverse will be "the biggest disruption humans have ever experienced," according to Jefferies, and that disruption will bring compelling investment opportunities. Jefferies views the metaverse as a new platform for the digital age. It won't replace the internet, but rather will build on top of its existing structure, according to the Wall Street firm. While a single metaverse could be more than a decade away, "as it evolves it has the potential to disrupt almost everything in human life that has not yet already been disrupted," said Jefferies equity strategist Simon Powell. "The metaverse will consist of numerous different layers and technologies, but it will ultimately result in a single shared source-of-truth that all stakeholders in the metaverse will recognize," Powell said. "The metaverse will be made up of objects, and all those objects must know that all other objects exist. From this foundation, we can create a ledger of all objects in the known metaverse, as well as their shared history of interactions and ownership." The rise of the metaverse should accelerate the digitization of everything, but is likely to start with immersive gaming experiences, said Powell. Plus, blockchain technology and cryptocurrencies should play a large role in the metaverse. This major change in the world order opens the door to a massive opportunity for investors, according to Jefferies. "The way that investors should think about this is to figure out what are all the key human activities that we engage in, and then to imagine how those activities will migrate to the online world," said Powell. To capitalize on the great disruption yet to occur due to the metaverse, Jefferies recommends a handful of stocks listed below. Companies are already trying to capitalize on this opportunity. For instance, Facebook changed its company's name to Meta in October. The new name reflects the company's growing ambitions beyond social media. Jefferies said Meta and Snap are both working on hardware to access the metaverse. This could give their social media platforms significant customer reach when the disruption begins to occur, said Powell. Gaming companies Roblox , Take-Two Interactive , Electronic Arts and Activision Blizzard also earned spots on Jefferies' list. Powell said Roblox is the closest of the bunch to being an early stage metaverse. Roblox was founded in 2006 and is best known for providing entertainment to children. However , last quarter, its revenue doubled as the number of users over the age of 13 are growing, according to a Roblox shareholder letter. "Electronic Arts (EA) has several IPs that would be ripe to be turned into walled garden metaverses: Skate, Sims, SimCity, and even its sports franchises," said Powell. Take-Two Interactive is currently running three games that arguably could be early stage metaverses, Jefferies said. "Activision Blizzard (ATVI) has one of the innovators in early metaverse with World of Warcraft in its library," said Powell. "Moreover, Call of Duty could use many of the tools in building a metaverse to better monetize and engage users (cross platform, cross universe, single currency economy)." To front-run music playing a role in the metaverse, Warner Music Group has invested in several start-ups that are building tools and platforms in the metaverse. Apple, for its specialty in devices, was also recommended by Jefferies as a stock to own to play the metaverse. Microsoft , Amazon and Unity Software are ways to play software's integration into the metaverse, the firm said. Lastly, crypto stocks Coinbase and Microstrategy have good exposure to blockchain and bitcoin, which Jefferies expects to be part of the backbone of the metaverse. "There will be a need for some form of money in this new world," said Powell. "While it's not clear what that currency will be there are already some emerging cryptocurrencies competing alongside the more obvious Bitcoin." — with reporting from CNBC's Michael Bloom.

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The metaverse will be "the biggest disruption humans have ever experienced," according to Jefferies, and that disruption will bring compelling investment opportunities.