Main financial assets discussed:
- Meta Platforms Inc. (formerly Facebook)
- Digital advertising market
- Virtual reality (VR) and augmented reality (AR) market
Top 3 key points:
1. Meta's primary source of revenue, digital advertising, is maturing, and the company's growth is slowing. The recent privacy changes introduced by Apple have also impacted advertising on social media platforms.
2. The Reality Labs division, focused on VR and AR, has yet to report a profit and has been experiencing declining revenues. There are concerns about Meta's ability to generate a return on investment in the VR market.
3. The newly launched Threads app is expected to boost Meta's revenue growth by attracting users from Twitter. However, it is still early to determine the app's impact on Meta's overall growth trajectory.
Recommended actions:
- **Hold**: Meta is currently priced within the range of fair value, and the future performance will largely depend on its ability to increase growth.
- Current investors should carefully consider their portfolio allocation to Meta and may choose to lower their current allocation and bank some profits.
- Long-term investors could consider replacing their long equity position with call options using a stock replacement strategy, particularly with the upcoming earnings announcement.
The global video game industry is expected to generate nearly $188 billion in revenue in 2023, with console sales driving the biggest revenue growth, and an increase in younger gamers contributing to the industry's growth; meanwhile, mobile game growth is expected to slow due to privacy-related challenges faced by developers.
The global gaming console market is projected to reach a market size of USD 47.02 billion by 2030, with a Compound Annual Growth Rate (CAGR) of 8.5% from 2023 to 2030, driven by the increasing prominence of digital games, subscription-based models, the rise of esports, and the introduction of VR and AR technologies.
The Meta Quest 3 is rumored to release on October 10th with a price of $499 for the 128GB model and $649 for the 512GB model, according to leaks from GameStop; however, there is some discrepancy in the leaked specifications regarding the RAM, as some sources claim it will have 8GB while others suggest 12GB, and other confirmed details include a Qualcomm Snapdragon XR2 Gen 2 chipset and a 4MP color video passthrough.
Meta announced the Quest 3, a more expensive VR headset than its predecessor, featuring a powerful Qualcomm chip, better screens, and the ability to view the world outside the headset, with preorders opening on Wednesday and shipping starting on October 10.
Sony's handheld gaming console, PlayStation Portal, has gained significant pre-order sales worldwide, challenging initial doubts and making a statement in the console rivalry, with Japan already selling out of the device.
Meta is planning to release a follow-up to the Quest 3 and aims to compete with Apple's Vision Pro by introducing a VR headset without controllers next year, focusing more on practical uses like gaming and productivity rather than the metaverse.
The Meta Quest 3 is a solid upgrade from the Quest 2, with sharper screens, faster performance, and mixed reality cameras, although it may not appeal to as many VR newcomers due to its higher price.
The Meta Quest 3 and Apple's Vision Pro are mixed reality headsets with significantly different price points and target audiences, but while Meta dominates the market in terms of market share, Apple's entry into the space has garnered considerable attention and increased competition.
