Facebook, Inc. Gearing Up for Oculus Rift
Facebook, Inc. (NASDAQ:FB) is now days away from its most anticipated launch of 2016. Bears may have been denouncing Facebook’s new technology, but FB stock bulls must rest assured that the “Oculus Rift” virtual reality (VR) headset has more potential than the market sees. Facebook’s VR headgear will prove to be more than just an entertainment gadget.
Facebook is rolling out the final Oculus Rift model to developers before its launch in early 2016. The launch of Oculus Rift is being touted as the next big thing for Facebook, but bears believe the virtual reality headgear will find little utility in the consumer market, except for in gaming. (Source: “Oculus Rift Shipping to Select Developers This Week with SDK 1.0,” Road to VR, December 21, 2015.)
But if you think gaming is the only industry where virtual reality headgear will find its utility, you couldn’t be more wrong. Here are at least three areas where the Oculus Rift could prove to be huge.
Oculus VR Headset Has Huge Potential
Imagine a scenario in which you go out looking for a new condo in a new development. The best way you can see what your future home will look like is through complicated floor plans and vague photos that give you only a rough idea of the architecture. Now imagine if you were able to actually walk through your future home, even before a single brick for it was laid. Wouldn’t that make your decision a lot easier?
Believe it; it’s not science fiction! This is very much a reality and a Canada-based VR company, Invent Dev, is already converting 2D floor plans to immersive 3D models that will be viewable with the Oculus Rift. (Source: “Virtual reality to offer foreign buyers a glimpse into Canadian real estate,” Global News, December 21, 2015.)
The biggest area where Oculus VR headgear will find its most use is in the field of education. The structure of an atom will no longer be a tough concept to grasp for your aunt’s high school students, nor will the complex mechanics of a machine be an enigma for your friend who works at the auto factory.
Instructors will no longer have to use diagrams and complex blueprints, nor will trainers have to worry about creating real-life scenarios for a demonstration to trainees. Oculus Rift will do the job much better and much faster.
The British government, for instance, has already announced plans to use the Oculus Rift VR headset to train paramedics to deal with unexpected traumatic situations they may experience in the field. (Source: “Medics Prepare For Battlefield Trauma In Oculus Rift, Without Leaving Their Chair,” Fast Coexist, July 4, 2015.)
Finally, speaking in broader terms, the healthcare industry will find generic utility in the Oculus Rift for healthcare practitioners during testing, viewing, and reporting. But more than that, it’ll be extremely useful for therapeutics.
In fact, many may be unaware of this, but virtual reality therapy (VRT) is a therapeutic treatment that already exists. Through VRT, patients with mental health issues or phobias are exposed to virtual situations using VR to help them overcome their fears.
The U.S. Department of Veteran Affairs, for instance, has been using the technology to help veterans from Afghanistan to deal with war-related post-traumatic stress disorder (PTSD). (Source: “Virtual-Reality Tech Helps Treat PTSD in Soldiers,” Live Science, August 8, 2014.)
I wouldn’t be surprised to see Oculus Rift driving demand as a therapy tool in similar exposure therapy in both personal and professional use.
All of this means Oculus could be a big catalyst for FB stock.
Now, UBS is estimating VR to be a $10.0-billion industry in the next four years, with Facebook earning more than $800 million by 2018. Although the sales will be slower in the beginning, if we assume the industry will be at $5.0 billion by 2018, that grants Facebook a good 16% of the market share. (Source: “Oculus Rift virtual reality headset launch set for 2016,” Financial Times, May 6, 2015.)
This is a conservative number, given the fact that Facebook is among the first movers and will enjoy an advantage for this reason. The only other major players at the moment are Alphabet Inc with “Google Cardboard” and Microsoft Corporation with “HoloLens.”
Yet, if we go by our conservative estimates, Oculus (both the hardware and the software) would still end up making up a quarter of Facebook’s revenues in the next four years, not only covering the costs of the $2.0-billion acquisition, but also contributing considerably to the company’s bottom-line numbers.
The Bottom Line on Facebook Stock
Google may have pioneered the technology with “Google Glass” and Cardboard, but Facebook is taking it a step further. It wasn’t until Oculus Rift that the notion of immersive virtual reality became a mainstream idea. The price of the headgear has not yet been finalized, but it is expected to be affordable for the masses, somewhat north of $350.00.
With some very useful applications beyond gaming and entertainment, Oculus has the potential to become a big revenue driver for the company and a strong growth driver for FB stock in the coming years.
The bottom line: I’m not betting against Oculus and certainly not Facebook stock.