uploads///facebook oculus unit

Oculus: Reason to Be Optimistic about Facebook Stock?

By

Mar. 23 2020, Updated 10:03 a.m. ET

Facebook (NASDAQ:FB) stock fell 12% last week. Coronavirus fears continued to drive the sell-off in stocks around the world. Looking past the virus pandemic, there are reasons for investors to remain optimistic about Facebook stock. Oculus, Facebook’s virtual reality business, is one source of optimism.

Article continues below advertisement

Oculus’s success could propel Facebook stock

In May 2019, Facebook released new versions of Oculus virtual reality headsets into the market. The flagship was Oculus Quest. So far, the Quest device, which starts at $400, has been a major hit. Specifically, the device helps Facebook obtain new customers. Last week, Facebook revealed that 90% of the customers who purchased the Quest headset during the 2019 Christmas holiday were new to the Oculus platform. Facebook stock rose on the day the Quest headset went on sale.

Facebook’s Oculus unit offers virtual reality devices and the content that goes with them, mainly games. Recently, Facebook acquired virtual reality game developers Beat Games and Sanzaru Games to bolster Oculus’s content division.

Currently, the virtual reality market suffers from a content shortage, which hampers its rapid growth. Therefore, Facebook’s acquisition of Beat Games and Sanzaru Games is part of its efforts to address the virtual reality content problem. The company hopes that content availability will enable Oculus to maximize its opportunities.

Through Oculus, Facebook has its sights on the $27 billion virtual reality hardware and software market. The company derives most of its revenue from selling ads. However, Facebook wants to diversify its revenue sources. The Oculus unit is central to the company’s efforts. The boost from the Oculus unit helped Facebook record a 26.3% increase in its non-advertising revenue to $1.0 billion in 2019.

Even with the recent coronavirus sell-off, Facebook stock has still risen more than 130% since it acquired Oculus in 2014.

Oculus devices keep people busy

So far, businesses have closed due to coronavirus. Companies have asked their employees to work from home to avoid spreading or catching the deadly coronavirus. With more people staying at home, devices like Oculus virtual reality headsets have experienced increased usage. The demand for Oculus devices continues to spike as the coronavirus continues to spread, which results in stock-outs. Oculus devices are back in stock, but Facebook still worries about supply constraints. Notably, the coronavirus has impacted manufacturing.

Although the coronavirus pandemic could boost the demand for Oculus devices, it has impacted Facebook stock. Now, the stock trades at more than a 30% discount to its 52-week high.

Advertisement

More From Market Realist

  • Huawei 5G advertisement with a man on a cellphone walking in front of it
    Tech & Comm Services
    Everything About 5G Explained—Patents, Royalty Charges, and Outlook
  • Discovery logo
    Tech & Comm Services
    Is Discovery Stock Better Than ViacomCBS Stock?
  • Woman looking out a window and Goldman Sachs logo
    Tech & Comm Services
    Goldman Sachs Lists Its Self-Driving Car Stock Picks
  • NNDM banner
    Tech & Comm Services
    Avoid Nano Dimension (NNDM), Stock Might Not Recover Soon
  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.