Facebook (FB) Unveils $199 Oculus Go, Slashes Rift Price

In a bid to popularize its virtual reality offerings among the masses, Facebook Inc FB has unveiled a new cheaper VR headset – Oculus GO.  It carries a price tag of $199, much lower than Oculus Rift, which, at the time of its launch, carried a price tag of $599.

It is to be noted that apart from Rift and GO, Facebook also has another headset named GEAR VR (priced at $129) that can be paired with all Samsung smartphones and works just like Oculus GO. However, GO is for people who don’t have a Samsung smartphone. 

For some time now, Oculus has been weighed down by numerous problems. Rift, despite being one of the most anticipated products, received mixed reviews from critics and users. Its hefty price tag was a dampener. In addition, the expensive $599 headset (with Touch controllers for another $200) requires a powerful $1000 PC to operate.

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This makes the device affordable to only a handful of customers and is primarily targeted toward hardcore gamers. To change that and bring more consumers under its fold, Facebook is rethinking its pricing strategy, taking a leaf from Sony’s SNE success story.

Sony has seen great success with its virtual reality headgear, PS4 headset largely driven by its compatibility with a PS4 console and a relatively low price tag of $399. In June, the consumer electronics giant announced that it has sold over 60.4 million units of the console and over 1 million headsets. In contrast, per a research firm Canalys, Facebook has sold less than 400,000 units of Rift in last year.

Facebook has now permanently slashed the price to $399. In March, Facebook had first slashed the price of the headset to $499 from $599 originally. Price of Touch controllers was trimmed to $100 from the original $200.

Oculus was founded by Palmer Luckey and Brendan Iribe in 2012 and acquired by Facebook in 2014. Facebook’s ambitious AR/VR plans are being fueled by Oculus. The company’s CEO, Mark Zuckerberg, said that Facebook will spend over $3 billion over the next 10 years. Zuckerberg believes that VR will emerge as a major computing platform in the coming years.

However, in February, Zuckerberg was quoted saying that the virtual reality efforts aren’t profitable now. However, he asked the investor community to be patient as the investments in VR will take some time to generate profits.

At its Oculus Connect Annual conference, Mark Zuckerberg was quoted by media reports saying,“Some people think that VR is isolating and antisocial. I honestly think it’s the opposite. If you can’t think of any way that your reality can be better then you’re not thinking hard enough.” Zuckerberg has big ambitions as reflected in Facebook's target to bring a billion people to use VR in the near future.

Apart from headsets, Facebook’s VR offering include Facebook Spaces. Spaces will enable users to connect with family and friends in an interactive virtual environment. Users can create their VR avatar and customize it to make it look like them. The app will not only help to create a virtual world but also keep users connected to reality by enabling Messenger calling.

Recently, Spaces was in the news for all wrong reasons as Mark Zuckerberg chose his cartoonish avatar to take a virtual tour of disaster hit Puerto Rico. Hurricane Maria has wreaked havoc in this tiny Caribbean island and it is grappling with a crisis of mammoth proportions.

Zacks Rank & Share Price Movement

At present, Facebook carries a Zacks Rank #2 (Buy).  In the past one year, Facebook’s shares have generated return of 35.2% compared with the Zacks Internet Services industry’s gain of 20.7%.

Stocks to Consider

Better-ranked stocks in the broader technology sector include Applied Materials AMAT, and Jabil Inc JBL. Both sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Applied Materials and Activision is currently projected to be 17.1% and 12%, respectively.

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