Facebook Inc shares should grow in the coming years says Gene Munster of Piper Jaffray, but he doesn’t think ads on WhatsApp are going to be the major driver. He’s looking at Oculus, a $2B VR firm that Facebook made part of itself last year. Mr. Munster reckons it will make Facebook shares worth $146, but there’s a few things in the way.
One of those is the large number of wrong-headed beliefs that the market seems to hold about Virtual Reality. In his report Mr. Munster laid out 5 major myths that the market will have to learn to leave behind if they want to see the true potential in the VR market, and in Facebook shares.
Facebook Inc won’t make you sick
The five myths, as outlined by Mr. Munster are as follows:
- VR is the next 3D TV
- It will make you sick
- It’s easy to convert games for
- It’s not social
- It will make you sick
Those looking at Facebook shares “don’t fully appreciate the value of virtual reality” says Munster, and they’ll need to get those myths out of the way before they can begin to see the opportunity that Mark Zuckerberg’s firm has in the market.
In a report issued a week ago Mr. Munster highlighted three coming catalysts for the Facebook VR segment. He said an Oculus dev event in September in Los Angeles will answer investor questions about the limited use cases of the device.
He added that the Oculus Rift consumer version will be launched “slightly earlier than investors expect,” and will go on sale in the early part of 2016. On top of that Facebook is “making the most aggressive investment” in VR right now, which makes Mr. Zukcerberg’s firm the best bet in the space long run.
Betting on Facebook
On Tuesday morning shares in Facebook were spiking in pre-market trading. That’s not because of anything Mr. Munster said, however, it’s because the market appears to be over the speed-bump that landed in its way on Monday.
After rumors of a Chinese collapse threatened to derail the US economy stock prices plunged across the board on August 24. Facebook shares closed the day at $82.09, down 4.29 percent for the day’s trading. At one point shares in the firm were selling for $72.
Mr. Munster may think that VR is a major source of future sales for Facebook, but most traders, and the rest of the Wall Street research houses, appear willing to leave that aside. They’re more interested in how ad values look on the firm’s core site, and how it’s going to roll those ads to video and its suite of social apps.
MKM Partners analyst Rob Sanderson, in a report released on August 18, discounted VR in order to focus on that space. He said that traders looking for a huge ad surge on Instagram would be disappointed. Facebook is looking at a “measured” rollout, and that means that demand will run ahead of supply for ads on the image-based social network for some time.