Wednesday, June 17, 2015

Oculus Rift Will Push Facebook Stock Higher

Oculus Rift is the clear front-runner in the VR race

Regardless of whether you like social media or not, there’s no denying that Facebook (FB) is a solid leader and a wise addition to any tech-centric portfolio.

As of the end of the first quarter this year, the number of monthly active users on Facebook had grown to more than 1.4 billion, with 936 million daily active users.

In the three years since its IPO, Facebook stock is up more than 110% — including 27% in the past year alone.

Facebook co-founder and CEO Mark Zuckerberg has grown the social media site into a $230 billion international conglomerate. FB has acquired some of the industry’s most popular communication and photo-sharing apps including Instagram and WhatsApp.

However, one of the most interesting acquisitions for the future of Facebook stock is virtual reality front-runner Oculus.

What Will Our Digital Future Look Like?

Zuckerberg has said that FB’s mission is to make the world more open and connected, and Oculus’s mission is to let people experience the impossible.

Even if the social media site doesn’t end up being heavily incorporated into the functionality and future of the Oculus Rift virtual reality headset, there’s no denying that VR is the next stage of technological evolution.

Simply being the parent company of the dominant player in the race to bring VR to the masses will boost Facebook stock when retail products are finally available.

Business Insider released a report earlier this month about the future of the virtual reality market. The site estimates that shipments of VR headsets will grow by 99% CAGR through 2020, creating a hardware market of $2.8 billion.

The driving force behind VR headsets such as Oculus Rift will be gaming, with shopping and streaming videos close behind.

A survey of 1,400 U.S. consumers revealed significant interest in the Oculus Rift headset. 49% of those surveyed expressed interest in trying the Rift, and 32% said they plan to buy a virtual reality headset.

Oculus Looks Like the Clear Leader

Just last week, at the “Step Into the Rift” event, Oculus revealed plans for a partnership with Microsoft (MSFT) to share technological advancements and make the Rift headset compatible with Xbox One.

With the video game market predicted to grow to more than $100 billion by the year 2017, shareholders of both Microsoft and Facebook stock could see gains stemming from retail sales of the Oculus Rift headset and associated Xbox One controller bundles.

Another innovation that should push Oculus Rift (and Facebook stock, by default) to the front of the pack is development of the Oculus Touch accessories — handheld controllers that provided tactile feedback and vibrations based on how users interact with a virtual reality world.

Oculus Touch, described by Wired, is like “double-fisted Wii remotes as imagined by Darth Vader.” While the Oculus Rift headset is slated for public release in the first quarter of next year, the Touch controllers might not be ready until the second quarter. Either way, Facebook stock is poised for a serious bump when these virtual reality devices hit the street.

In a rather surprising twist, on Monday Microsoft unveiled a virtual reality version of its iconic building block game Minecraft. MSFT purchased the game franchise last year for $2.5 billion after more than 100 million copies of the game were purchased and downloaded from Xbox Live, making it one of the most popular games in the world.

However, according to NBC News, the virtual reality version of Minecraft was built specifically for the HoloLens, Microsoft’s own VR headset, rather than the Oculus Rift headset.

It has been confirmed that the Oculus Rift will be available for purchase in the first quarter of 2016, while the HoloLens hasn’t been given an official release date. MSFT has only indicated that the launch should be around the same time as that of the Windows 10 operating system, which is slated for release on July 29th.

Being first-to-market with a working VR headset could be a major advantage, considering the hype and interest surrounding the budding virtual reality market. However, considering the differences between the Oculus Rift and HoloLens, the Facebook-owned VR developer is likely to sell significantly more units, even if the headset launch date lags Microsoft’s by a few months.

Of course, that’s also assuming that the HoloLens will actually be ready for retail distribution this year.

Bottom Line for Oculus Rift and Facebook Stock

Facebook CEO Mark Zuckerberg is clearly focused on advancing the world’s technological capabilities and spreading the benefits of modern tech to all corners of the globe. FB may be the foundation for his aspirations, but his ability to identify future trends and capitalize on the demographic reach of his social media site is unprecedented.

Investors who want to get in early on the multi-billion-dollar virtual reality market would do well to buy shares of Facebook stock. The VR arena hasn’t yet taken shape, and consumer sentiment is likely to change once these products are on store shelves. By investing in FB, tech-focused portfolios can participate in the success of Oculus Rift, yet also remain shielded if VR is a dud.

Article originally appeared on InvestorPlace (06/17/2015)

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