For the past few years, virtual reality has been on Wall Street’s radar. While adoption has been growing in the gaming and early adapter communities, large market penetration has yet to be achieved. This could be the year that VR breaks into the mainstream.
However, 2018 saw some negative news for the industry. Notably, IMAX, which was positioning itself as a major content creator in the VR arena, announcing that it would be shutting down all Virtual Reality operations.
With Facebook’s Oculus Quest headset hitting markets this year, analysts think that this may mark a shift towards a wider acceptance of VR. Longtime Apple Analyst and Loop Ventures partner, Gene Munster, even compares it to the adolescent smartphone market in 2007.
“Today, the truly compelling VR experiences are only accessible by those with a high-powered gaming computer and a cumbersome, corded headset,” writes Munster. “The Quest represents a big step in VR’s journey towards the mainstream, but another year is needed for the world find out about it. The first iPhone only sold 1.4 million units in 2007 but went on to sell 11.6 million more the following year. VR will soon have its first-generation iPhone, and we expect a similar, but likely less rapid adoption rate.”
While it’s tempting as an investor to see a market on the verge of explosion, the sad truth is that there are little to no pure-play VR stocks. For investors looking to bet on the future of virtual reality, their money will likely be tied in with large companies like Sony, Facebook, and gaming stocks.
Facebook is one obvious option, and the stock is largely discounted in its current state. Investors looking to get in with a stock exposed to the VR space probably won’t regret investing in Facebook at its current share price. Even if the Oculus Quest is a dud, an overall recovery for the social media company is likely as headwinds die down and tech stocks as a whole see some short-term recovery in the first and second quarter of 2019.
Sony is another company with some virtual reality exposure that investors can get in on. In fact, with over 3 million PlayStation VR headsets sold, the company is the de facto leader in headset sales worldwide, for now at least. With other companies entering the scene with more high powered sets at a reasonable price point, Sony will be left to adapt or die, and, according to market experts, that adaptation is unlikely to occur prior to the release of their Playstation 5 console in 2020 or 2021.
Surprisingly, Hewlett-Packard, the company which has reinvented itself and its business model half a dozen times, is making a VR play as well. Moreover, it’s targeting the professional market rather than solely the consumer gaming and recreation community.
“Virtual reality is changing the way people learn, communicate and create,” says Xavier Garcia, who is the vice president and general manager of Z Workstations at HP Inc. “Making the most of this technology requires a collaborative relationship between customers and partners. As a leader in technology, HP is uniting powerful commercial VR solutions, including new products like the HP Z VR Backpack, with customer needs to empower VR experiences our customers can use today to reinvent the future.”