Analysts Believe That Rising Oculus Sales Will Boost Facebook Stock Significantly

According to Jefferies analyst Brent Thill, Meta's latest Oculus VR handset, the Quest 2, appears to have been a hot present this holiday season, emphasizing one reason why shares of the social media giant remain a buy.

The Oculus app was the most downloaded software in the App store on Christmas Day, according to new information released by Thill on Tuesday. On Christmas Day, Oculus downloads and daily active users increased by 70% and 90%, respectively, over the previous year. Because the Quest 2 isn't cheap at roughly $400, the increases are astounding.

They see this massive increase in app usage as proof that the improved slate of games and experiences is resonating with users and that Quest 2 sales are likely to surprise them. Quest 2s were popular gifts in every household this Christmas, with 'SuperHot' and 'Eleven Table Tennis' among the favorite games.

As teens spend more time on services like SNAP, TikTok, RBLX, and Fortnite, it's becoming more difficult for Facebook to attract and retain younger users. They believe that Quest 2 could serve as an on-ramp for attracting these users, as they can more easily be introduced to FB's diverse offering of games, experiences, and social platforms.

Meta's stock increased 1% to $348 in pre-market trading on Tuesday. On the Yahoo Finance platform, the stock was among the top three trending tickers. Thill, a long-time Meta bull, kept his Buy rating on the stock with a $420 price target. While Thill agrees that privacy concerns pose a danger to Meta's stock, he believes the value is too enticing to ignore in light of significant fundamental drivers like Oculus.

Their most recent advertiser checks indicate that digital ad expenditure is on the rise. Furthermore, according to recent Mastercard data, online retail holiday sales were up 11% year over year (and 61 percent compared to 2019), indicating that Christmas ad demand was likely strong. With the company trading at under 20x FY23E profits per share (vs. a Nasdaq comparable 26x), we believe there is lots of room for the stock to rise in the coming year.