NEW YORK (TheStreet) -- Shares of Facebook (FB) - Get Report fell 0.32% to $78.72 in early morning trading Monday after HTC announced it is working with Valve Corp. to compete with both the social media giant's Oculus and Sony's (SNE) - Get Report Project Morpheus in the virtual reality space.
The HTC Vive, a pair of virtual reality goggles for use with a controller and sensor towers, uses game developer Valve's Steam VR tracking technology to allow users walk around and explore simulated environments.
The Vive will run content from Valve, along with offerings from Google (GOOG) - Get Report, Lions Gate Entertainment (LGF) , and HBO, the company announced. The device will be available to customers later this year.
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"Virtual reality will become a mainstream experience for general consumers," HTC President Peter Chou said at the product announcement in Barcelona over the weekend.
The move marks another venture for HTC outside the smartphone market. The company in the past several months has debuted a periscope-shaped RE action camera and worked on a smart wristband with Under Armour(UA) - Get Report.
HTC, one the top smartphone vendor in the U.S., has experienced three years of annual sales declines. The company's sales and share price have plunged thanks in part to cheaper phones from Xiaomi and aggressive marketing from Samsung (SSNLF) .
Shares continued to move higher this week, hovering around all-time highs. Two recent media articles about Facebook's Oculus division (acquired for $2 billion in March 2014) shows that the company has an opportunity to enable court-side and rink-side virtual seats for NBA and NHL games through its relationship with Samsung and content creator NextVR. We believe this is a meaningful step for Oculus and the value proposition for Oculus and Samsung Gear VR users. From the NBA and NHL perspectives', this would create an "infinite seat," which is a seat they could sell an infinite number of times. Oculus Rift is a huge long-term (five years or more) opportunity for Facebook. We both have tried it and can confirm that virtual reality is a breathtaking -- and awesome -- experience. In the world of tech, you can never have too many shots on goal. Our target is $90.
Separately, TheStreet Ratings team rates FACEBOOK INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate FACEBOOK INC (FB) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 18.6%. Since the same quarter one year prior, revenues rose by 48.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- FB's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 9.04, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for FACEBOOK INC is currently very high, coming in at 94.31%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 18.20% trails the industry average.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Internet Software & Services industry and the overall market, FACEBOOK INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: FB Ratings Report