Facebook (FB) Slips on $2-Billion Oculus Buy

NEW YORK (TheStreet) -- Facebook (FB) is moving lower on Wednesday after announcing it had splashed $2 billion on its purchase of Oculus VR, a virtual reality company.

By late morning, shares had taken off 2.1% to $63.56.

The social network said it had reached an agreement to acquire the company for around $ 2 billion, which includes $400 million in cash and 23.1 million shares of Facebook stock. Oculus will also be eligible for up to $300 million in performance milestone benefits.

"Mobile is the platform of today, and now we're also getting ready for the platforms of tomorrow," said CEO Mark Zuckerberg in a statement. "Oculus has the chance to create the most social platform ever, and change the way we work, play and communicate."

The transaction is expected to close in the second quarter of 2014.

Must Read: Warren Buffett's 10 Favorite Stocks

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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:

  • FB's very impressive revenue growth greatly exceeded the industry average of 16.4%. Since the same quarter one year prior, revenues leaped by 63.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although FB's debt-to-equity ratio of 0.03 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 11.46, which clearly demonstrates the ability to cover short-term cash needs.
  • Powered by its strong earnings growth of 566.66% and other important driving factors, this stock has surged by 158.97% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. 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.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

More from Markets

Google Invests in JD.com; Comcast-Disney Battle Nears Head -- ICYMI

Google Invests in JD.com; Comcast-Disney Battle Nears Head -- ICYMI

REPLAY: Jim Cramer on Tariff Worries, Oil, Alphabet and Centene

REPLAY: Jim Cramer on Tariff Worries, Oil, Alphabet and Centene

Video: Athens Stock Exchange CEO on What's Next for Greece's Debt Woes

Video: Athens Stock Exchange CEO on What's Next for Greece's Debt Woes

Dow Drops Over 100 Points on Trade War Worries

Dow Drops Over 100 Points on Trade War Worries

What Angela Merkel's Uncertain Political Future Means for Greece's Debt Woes

What Angela Merkel's Uncertain Political Future Means for Greece's Debt Woes