This Could Be Big for FB Stock
Preorders of Facebook, Inc.’s (NASDAQ:FB) most anticipated release of the year have been opened and…hallelujah! Oculus’ web site is already crashing on heavy traffic. Owners of FB stock should take note that while this is only a trailer, the complete picture will almost certainly be a blockbuster.
Heavy traffic on the “Oculus Rift” web site has momentarily shut out buyers who are now waiting to get their hands on the headgear. Facebook’s biggest bet in the technology world, the Oculus Rift virtual reality (VR) headset, is finally up for grabs at $599.00. (Source: “Oculus Rift Pre-Orders Now Open, First Shipments March 28,” Oculus.com, January 6, 2016.)
The question: will Facebook manage to recoup the $2.0 billion it spent in 2014 to acquire Oculus?
My money is on the Oculus Rift! I’m forecasting this device will turn out to be comparably as big as the “iPhone”—if not bigger.
Take, for instance, the smartphone revolution that began with Apple’s iPhone. With approximately 1.4 million units sold in the first year of its launch in 2007, the company managed to make around $558.6 million for the first iPhone, priced at roughly $399.00 per unit.
To meet that target with a $599.00 Oculus Rift VR headset, Facebook will only have to sell about 933,000 units. By then, Facebook will have covered a good 28% of its $2.0-billion acquisition cost. Can Facebook manage to sell that number in one year? It’s definitely conceivable.
In fact, it is being estimated that PC virtual reality devices, like Facebook’s Oculus Rift and Sony’s “Morpheus,” could see sales of more than 6.6 million headsets this year. (Source: “Virtual Reality Video Game Industry to Generate $5.1 Billion in 2016,” Fortune, January 5, 2016.) Naturally, Facebook’s Oculus Rift, being the first mover and so far the only one of its kind taking orders, will naturally be taking one of the biggest shares in this number.
Now, some believe that the higher price point might push away some buyers who were looking for a cheaper price on the Oculus Rift. I, along with some of my friends, was expecting Oculus to be priced at a little over half of its current price. Speculation was that it’d be priced competitively with the “Xbox One” and “PlayStation 4.” But now having seen the complete VR package, I must admit that it has far beaten my expectations.
The complete Oculus Rift package includes an Xbox controller, desk-mounted sensor and a remote, the VR headgear, and a neat carrying case, which Oculus founder, Palmer Luckey, very rightly defines as “dope.”
For the complete package, serious gamers won’t necessarily mind paying the extra $250.00.
The Bottom Line on FB Stock
Facebook is bringing a huge revolution in the immersive virtual reality industry and as a first-mover, its VR technology might even become a household name. FB stock will ride higher on the VR revolution in the coming years, as the virtual reality industry sets up to become a multibillion-dollar industry. (It is estimated to hit $150 billion in revenue in the next four years.)
Rest assured that Facebook might be able to recoup its $2.0-billion acquisition cost much faster than the market initially expected. I foresee FB stock bears making a run for cover.