FB Stock: Goldman Sachs Delivers Reality Check to Facebook Inc Bears

facebook stockThe One Reason to be Bullish on FB Stock

When it comes to virtual reality (VR), Wall Street wasn’t buying what Facebook Inc (NASDAQ:FB) was selling. FB stock surged along with its bottom line, but the Street took a dim view of VR. But Goldman Sachs is upending that conventional wisdom.

The investment firm thinks virtual and augmented reality could become an $80.0-billion market by 2025. That would be roughly equivalent to the current size of the desktop computer market.

Investors had scoffed at how much Facebook paid to acquire Oculus VR and its “Oculus Rift” VR headgear. But the $2.0-billion investment gave Facebook an early mover advantage in this now rapidly growing industry.

“We continue to believe that VR/AR is poised to be the next computing platform. And like the transition from desktop to mobile, it will be disruptive… The first half of 2016 will see the most significant progress in VR/AR ever,” wrote analyst Ben Schachter. (Source: “Goldman Sachs Has Four Charts Showing the Huge Potential in Virtual and Augmented Reality,” Bloomberg, January 13, 2016.)


Devices Like Oculus Rift Could Be in Every Home

Goldman Sachs estimates that VR/AR technology could have a wide set of applications. The technology could prove useful in a range of fields, from health care to real estate. By these estimates, 85% of the potential growth in this market comes from non-gaming sources.

virtual reality use by 2025 stats

“We think 2016 is a very transformative year for the area of virtual reality and augmented reality,” said Heather Bellini, a senior executive at Goldman Sachs. “Virtual reality is what we believe will be the next generation computing platform.” (Source: “The Real Deal With Virtual and Augmented Reality,” Goldman Sachs web site, last accessed February 5, 2016.)

There is a slight, but important difference between virtual and augmented reality. The former uses a head-mounted display that makes you blind to all else. The latter, augmented reality, on the other hand, is like wearing a pair of glasses—you can see other objects but the “glasses” project a 3D digital environment onto your surroundings.

“While today virtual reality is primarily thought of as a place for hardcore gamers to spend their spare time, it’s increasingly impacting sectors that people touch every day,” said Bellini. “For example…it’s being used in medical institutions at hospitals to train doctors [and] it’s transforming the ability for educational institutions to be able to go on field trips.” (Source: Ibid.)

For what it’s worth, Goldman Sachs is incredibly bullish on the power of virtual and augmented reality. By getting in early, Facebook could reap the benefits of an early mover advantage, meaning holders of FB stock could be very happy once 2025 rolls around.