We Believe Social Virtual Reality Will Emerge as Path for Facebook Inc (FB) to Monetize Oculus: Top Analyst

Yesterday, Facebook Inc (NASDAQ:FB) co-founder and CEO Mark Zuckerberg led the keynote at the social media titan’s annual Oculus Connect developer conference.

Positive on the company’s virtual reality (VR) monetization prospects, Piper Jaffray top analyst Gene Munster remains bullish on back of the conference, reiterating an Overweight rating on FB with a price target of $185, which represents a nearly 44% increase from where the shares last closed.

From Munster’s perspective, virtual reality faces a progression over the next two years away from being considered merely an “isolated experience.” For this reason, the analyst contends Facebook and its 2014-acquision Oculus VR have unique leverage in the VR capacity.

Currently, Zuckerberg has a VR prototype in the works with a social twist, including features like facial expression recognition, eye contact, and detailed avatars. Munster predicts social virtual reality will evolve and provide regular incentive for consumers to opt for quality virtual reality headsets thanks to their unique prowess in making one feel closer to those at a distance.

Additionally, Oculus announced at the conference its new “asynchronous spacewarp,” which will enable computers with lower specs to run an Oculus Rift, at a price reduction from $1,800 to $1,300, which is ahead of Munster’s expectations. Though costly, the analyst believes the price cut “bodes well for VR adoption.”

“Zuckerberg’s lengthy comments suggests Facebook is willing to make the investments to make VR cheaper, more immersive and introduce social into what is an isolated VR experience today. Specifically, Zuckerberg outlined that Facebook has invested $250M into VR R&D and expects to invest another $250M in the near future. Assuming the company spends $500M on VR R&D in 2017 implies about 10% of the company’s R&D is related to Oculus. Lastly, we expect the quality of Oculus content to take a step function up in 2017, based on the unreleased games we demoed at Oculus Connect,” Munster concludes.

Looking forward, Munster anticipates three Oculus VR headsets are in progress and believes the forthcoming hardware launch could reveal the new technology within the next two to three years.

As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, top five-star analyst Gene Munster has achieved a high ranking of #6 out of 4,190 analysts. Munster upholds a 67% success rate and yields 19.1% in his annual returns. When recommending FB, Munster realizes 39.0% in average profits on the stock.

TipRanks analytics demonstrate FB as a Strong Buy. Based on 37 analysts polled in the last 3 months, 32 rate a Buy on FB, while 5 maintain a Hold. The consensus price target stands at $156.26, marking a 21% upside from where the stock is currently trading.


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