Meta’s Push into VR, AR, and AI: Should Investors Buy?

September 26, 2:33 pm

Meta Platforms (META) has once again captured the market's attention with a string of product launches that signal the company's continued push into virtual and augmented reality (VR/AR), alongside advancements in artificial intelligence (AI).

Trading at $564 per share, up 63% year to date, Meta's stock is nearing an all-time high. With the launch of the Quest 3S, augmented-reality (AR) smart glasses, and new AI chatbot features, investors are rightfully asking: Is Meta a good buy at this price?

The Quest 3S: A Strategic Move in the VR/AR Space

Meta's latest offering, the Quest 3S, is priced at $299 - a significantly lower price point compared to its predecessor and other market competitors like Apple's Vision Pro. This strategic pricing move positions Meta to capture a broader audience in the VR space, which could further solidify its dominance in a market where it has already sold millions of units. Despite its market-leading position, the Quest 3S faces challenges, including competition from Apple and the slow pace of mainstream VR adoption.

However, Meta's ongoing investment in VR and AR - totaling more than $65 billion since its acquisition of Oculus in 2014—reflects CEO Mark Zuckerberg's long-term vision. The Quest 3S is more than just a gaming device; Meta is positioning it as a multitasking computing device, which could eventually replace traditional computing platforms. This aligns with Zuckerberg's ambition to prevent Apple from controlling future hardware platforms, a move that could have significant long-term implications for Meta's market share and revenue streams.

AR Smart Glasses and AI: The Future of Meta?

In addition to the Quest 3S, Meta's unveiling of the Orion AR smart glasses prototype represents another leap toward Zuckerberg's vision of lightweight, transparent glasses that seamlessly integrate digital information into the real world. Although still in the prototype stage, the Orion glasses highlight Meta's commitment to staying at the forefront of AR technology.

Moreover, Meta's expansion into AI with the new features for its Meta AI chatbot and the Ray-Ban Meta smart glasses demonstrates the company's ability to integrate cutting-edge technology into its existing product ecosystem. The inclusion of voice interactions and celebrity-voiced AI further differentiates Meta from its competitors and could enhance user engagement across its platforms, including Facebook, Instagram, and WhatsApp.

Revenue Growth Amid Heavy AI Investments

Despite the significant investments in VR, AR, and AI, Meta's revenue continues to grow, indicating that its core platforms - Facebook, Instagram, and WhatsApp - remain strong drivers of profitability. The company's ability to innovate and maintain growth, even while investing heavily in future technologies, is a testament to its robust business model.

However, it's essential to consider the risks. Meta's Reality Labs division, responsible for its VR/AR initiatives, has been a substantial cost center with no guarantee of immediate returns. The success of products like the Quest 3S and Orion glasses is far from assured, and the company’s ability to translate these innovations into significant revenue streams is still uncertain.

Meta’s Core Business: A Strong Foundation

While Meta's innovations in VR, AR, and AI are exciting, it’s crucial to recognize the continued strength of its core platforms—Facebook, Instagram, WhatsApp, and the recently launched Threads.

Facebook remains a powerhouse in social networking, with nearly 3 billion monthly active users. Its ability to drive engagement and ad revenue has been pivotal to Meta's sustained growth, even as younger platforms emerge.
Instagram continues to thrive as one of the leading social media platforms globally, especially among younger demographics. The platform's integration of shopping features and Reels—a direct competitor to TikTok—has bolstered its monetization potential.
WhatsApp is the world's leading messaging app, with over 2 billion users. Although primarily a communication tool, Meta has been steadily introducing business-oriented features, like WhatsApp Business, to monetize the platform further.
Threads, launched as a direct competitor to X (formerly Twitter), has rapidly gained traction, though its long-term impact remains to be seen. The platform has attracted millions of users and is seen as Meta's latest move to diversify its social media portfolio and capture users migrating from other platforms.

These platforms collectively contribute to Meta's robust revenue streams, primarily driven by advertising. Despite economic headwinds and increased scrutiny over data privacy, Meta has managed to maintain its advertising dominance, thanks to its vast user base and advanced targeting capabilities.

Is Meta a Good Buy?

For investors, the question is whether Meta's current valuation justifies the potential rewards and risks. At $564 per share, Meta's stock is trading near its all-time high, suggesting that the market has already priced in much of the anticipated growth. However, if you believe in Meta's long-term vision of dominating the VR/AR space and integrating AI into everyday life, there could be substantial upside.

Meta's focus on building the infrastructure for future computing platforms - whether through VR headsets, AR glasses, or AI chatbots - positions it as a potential leader in these emerging markets. Yet, with significant capital expenditures and the slow adoption of some of these technologies, there is also a level of risk involved.

Conclusion

Meta's recent product launches highlight its commitment to innovation and its long-term vision of becoming a leader in VR, AR, and AI. While the stock is already near an all-time high, investors with a long-term perspective might find value in Meta's ambitious plans. However, it's essential to weigh the potential for future growth against the risks associated with its hefty investments in emerging technologies.

Currently, our system has Meta as a hold but trending towards a buy.

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