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If you've been paying attention, things haven't been going well for Facebook (NASDAQ: FB ). Facebook stock can't seem to get any traction between scandals.
The FANG member had hoped that its new cryptocurrency- Libra- would be a game-changer. However, those operations have only left regulators even more frightened and could be D.O.A. before they really get started.
At the same time, FB is now being forced to write a $5 billion check to the FTC following the Cambridge Analytica scandal.
Add in general public distrust and a growing #deleteFacebook movement , and it's been tough to be FB stock investor. So, any good news on the Facebook front would be a welcome sign.
And they just may get it on the virtual reality front.
FB has long been a bit player in VR But these days, the tech firm is starting to gain some serious traction and score a series of big deals to usher in a new wave of virtual reality gaming. While it won't take the sting of a potential $5 billion fine away, it will help the medicine go down. In the end, VR gaming could be the next wave and diversified earnings stream that Facebook stock needs.
Oculus and Facebook Stock
One of the cool things about how modern tech firms operate is that can use the cash flows from their main businesses to sort of fund hobbies. Google (NASDAQ: GOOG ) uses search revenues to fund Waymo and autonomous cars.
Amazon (NASDAQ: AMZN ) uses cash-flow heavy cloud operations to pay for its forays into new delivery options. What's great is that these hobby operations can (and often do) turn into big money makers for their owners.
Facebook is no different in this regard. Its hobby happens to be virtual reality. When it bought Oculus back for $2 billion back in 2014, modern V.R. was in its infancy. Oculus didn't actually have a formal product and FB had no real direction for the division. And in fact, Oculus has been a point of contention within Facebook and has seen plenty of high-profile leadership departures.
But these days, the hobby may be paying off. Last year, the firms released the tethered Oculus Rift headset and this year, it followed up with wireless Quest. The $399 fully wireless headset has turned out to be a smash hit for FB. So far, sales of the unit have grown more than 54% over 2018's numbers. That's managed to crush Facebook's own internal sales projections in a big way.
The real end-user of the device has been surprising as well. So far, the bulk of sales has been for corporate training. Before last holiday season , Walmart (NYSE: WMT ) began using the Oculus Go virtual reality headsets to train associates on "new technology, soft skills like empathy and customer service, and compliance ."
Here's What's Next for Facebook Stock
Using VR for training has a long runway and will provide plenty of growth for FB and Oculus over the long haul. But the obvious play for the VR is just getting started and Facebook recently announced some big plans for the division.
Virtually reality is made for gaming and the promise of using the tech for this purpose has been signaled since really the 1980s. Facebook has already seen some moderate success with games on the Oculus. But lately, Facebook has started to step up its partnerships and offerings in a big way.
According to The Information , Facebook has signed exclusive deals for VR versions of immensely popular games "Assassin's Creed" and "Tom Clancy's Splinter Cell." Here, FB gets the only access to them for VR consoles.
Given the immersion factor of these games, it's a huge coup for the Oculus platform. It also highlights, how Facebook's VR units could be sharing space with your Microsoft (NASDAQ: MSFT ) Xbox in the near future. The Information also reports that Zuckerberg is looking into buying gaming studios outright in order to create IP and games exclusively for Oculus.
With a price point comparable to other gaming units, the move into Oculus-exclusive games is great for the future. By buying its own studios and landing new games, Facebook is setting itself up to score more users, hardware sales and content revenues down the road.
While VR revenues are a drop in FB's bucket today, the chance to bring VR to even a sliver more of Facebook's 2.38 billion monthly active users is certainly tantalizing. Zuckerberg has a goal of getting over a billion people into Facebook's VR operations. Gaming will help on that lofty goal.
The Bottom Line on Facebook Stock
For investors, the real moves in VR and the expansion of its gaming partnerships is a very bullish sign. Given that some of its other moves and classic business lines are coming under intense public and governmental scrutiny, gaming is a relatively safe bet that can generate some serious long-term revenues for the firm. And given its foothold as the only VR game in town, it's a huge advantage over other rivals.
The best part is that this revenue stream will be far away from the problems of crypto and data mining.
For investors, that could be a great long-term win for Facebook stock. In the end, it's showing that Facebook is taking its future seriously and that Oculus is turning into less of a hobby business and more into a serious money-maker.
Disclosure: At the time of writing Aaron Levitt held a long position in AMZN stock.
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