Virtual reality (VR) – a broad term that describes interactive user-generated experiences within a simulated environment – represents the next great paradigm shift in computing. Once considered the lore of science fiction movies, VR has emerged as a tangible market with real companies developing powerful technology to enhance end-user experience.
VR is still very much uncharted territory for traditional investors. But as the market grows tenfold over the next six years, investors should already be exploring the VR landscape and what it has to offer. Below are three Canadian technology stocks that could help you capitalize on the soon-to-be $560 billion market.
Before investing in VR, keep in mind that this is a highly volatile segment. Many VR-dedicated firms trade as penny stocks and have suffered huge declines in the past year. That’s why it’s important to invest based on value proposition and long-term outlook as opposed to share-price performance.
Top VR Companies:
- D-BOX Technologies Inc. (TSX: DBO)
- YDX Innovation Corporation (CVE: YDX)
- Spectra7 Microsystems (TSX: SEV)
D-BOX Technologies Inc. (TSX: DBO)
- Market Cap: $27.3 million
- Annual Revenue Growth: 12.9% (March 2018)
- Free Cash Flow: $1 million
- Forward PE: N/A
D-BOX Technologies has carved out a strong niche in the VR landscape. The Quebec-based company designs and manufactures moving seats found in cinemas and theme parks to create immersive entertainment experiences. The D-BOX motion system is deployed in 660 cinemas across 40 countries and was recently featured in the Captain Marvel movie. Although D-BOX was created specifically for the movie industry, it has expanded into video games and other domains where VR is prevalent. The company has expanded its revenue each year since 2009, highlighting its growth potential.
YDX Innovation Corporation (CVE: YDX)
- Market Cap: $7.8 million
- Annual Revenue Growth: -67% (2017)
- Free Cash Flow: -$3.4 million
- Forward PE: N/A
YDX Innovation made headlines earlier this year when it landed a high-profile business partnership with The Walt Disney Company Brazil to create exclusive virtual reality content. The partnership centres on the Arkave VR Arena, a free roam multiplayer platform that was originally developed by YDX. At just $0.15 per share, YDX is a true penny stock. Although the company’s revenue growth disappointed in fiscal 2017, the last year in which there was available data, YDX has announced a shift in focus. This includes greater emphasis on eSports, one of the fastest growing segments within the VR landscape.
Spectra7 Microsystems (TSX: SEV)
- Market Cap: $20.3 million
- Annual Revenue Growth: -63% (December 2018)
- Free Cash Flow: -$9 million
- Forward PE: 8.50
After reporting back-to-back years of revenue growth, Spectra7 Microsystems took a big step backwards in 2018 as full-year revenues plummeted. As the company noted in its most recent earnings call, the downshift was “driven by VR market softness” in the first half of the year. With the rough patch now over, Spectra7 expects to get back on track quickly. The virtual reality company manufactures virtual reality hardware, including the patented VR-9 DreamWeVR, cable connector technology and chips that allow augmented devices to achieve higher resolutions. As demand for VR technology grows, Spectra7 is well positioned to capitalize.
Virtual reality represents the next frontier in digital content creation. Although the sector is highly volatile and good VR stocks are hard to come by, a proactive approach will help you get the ball rolling. For now, D-BOX Technologies, YDX Innovation, and Spectra7 Microsystems are a good place to start your exploration.