It has been almost two years since Facebook (FB) dropped $2 billion on Oculus VR, a virtual reality company operating independently of its parent since the acquisition. At the time, Facebook founder and CEO Mark Zuckerberg told consumers and investors that immersive gaming — an area where Oculus already had “big plans” — would be the first focus before other applications in entertainment, education, healthcare and more were explored.
Now, with Facebook stock sitting nearly 60% higher than it sat on the day of the announcement — thanks in part to a stellar 33% run in 2015, which came even as the broader market moved sideways — that talk is turning into action.
This morning, as the Consumer Electronics Show gets under way in Las Vegas, Oculus VR will begin accepting preorders for its Rift headset today.
The headset is expected to ship in the first quarter and will include an Xbox One controller (as Oculus’s Touch controllers have been delayed until second half of 2016) and two games: EVE Valkyrie and Lucky’s Tale.
A price hasn’t been announced yet, but Oculus VR founder Palmer Luckey — who started the company via a quite successful Kickstarter campaign — is expected to address those details in his Reddit “Ask Me Anything” this evening.
Rift’s Impact on FB Stock
Several analysts agree that the price of the Rift is not especially important for Facebook stock, though, unless it falls dramatically outside the expected range. Piper Jaffray’s Gene Munster believes the headset will go for around $450, which he says would represent a $100 loss per unit. This “investment” would have a minimal impact, he believes.
Meanwhile, Daniel W. Rasmus, the founder and principal analyst of Serious Insights, says Oculus isn’t going to fundamentally shape FB stock’s income statement. Instead, it will be more like a positive footnote, as the launch is symbolic more than anything else. “The PR value,” he added, “is very large as it is really Facebook’s first foray into hardware.”
This echoes a point Munster made: that “the availability of Oculus Rift should mark a turning point in investor optimism on the VR theme, notable that VR is the start of a new computing paradigm.”
The “VR theme” has high expectations already. The Consumer Technology Association expects 1.2 million headsets to be sold this year, while Juniper Research is even more optimistic. The latter predicts virtual reality headset shipments will expand tenfold over the next five years, growing from 3 million this year to 30 million in 2020.
That industry momentum and Oculus’ first-mover status are promising, but it’s important to note that they’re long-term trends. A rising tide seems sure to lift Facebook stock at some point, but the launch of the first headset isn’t going to spur results overnight.
While Rasmus sees Oculus as the darling of the entertainment side of the industry, for example, it remains to be seen if the company can capitalize on the business markets Zuckerberg nodded to in his original announcement. And with regards to entertainment, question marks remain around content.
“Investors should look most pointedly at the availability of content,” Rasmus explained. “If there aren’t good, positive experiences for Rift, then the platform won’t have the momentum it needs to be a sustaining component of the Facebook portfolio. And I don’t mean just a few titles. All failed platforms had a few titles. Massive, bottom-up and top-down content will be required.”
As a result, he agrees that even a full year is far too small of a window to determine the success and impact of the Oculus headset.
Bottom Line for FB Stock
Add it up, and Facebook stock investors definitely should be smiling about the launch of the Oculus VR headset, as it showcases potential around both hardware specifically and virtual reality more broadly.
But despite the positive sentiment, they shouldn’t be fooled into thinking it’s going to show up in an earnings report right anytime soon.
Alyssa Oursler is based in San Francisco and writes about technology, investing, gender and entrepreneurship. Her work has appeared on Forbes, Business Insider, MSN Money and more. You can follow her on Twitter here or check out her personal site here. As of this writing, she was long FB.