Analyst: Oculus Rift to Ship 5M Units in 2016, Sold at Cost

15th October, 0 replies

Facebook will ship five million Oculus Rift headsets in 2016, according Credit Suisse analyst Stephen Ju, as reported by Barron's.

The Oculus Rift headset will also be sold at cost and the average asking price is expected to be $350.

"While pricing for the Oculus Rift has yet to be announced, various media outlets have pegged initial pricing at ~$500," said Ju. "Our current forecast implies that Oculus will ship ~5 million units in 2016, with an average ASP of roughly $350. We expect Facebook to price the headsets at cost in an attempt to drive initial consumer adoption – with the expectation that the company plans to monetize the devices overtime via associated software revenue."

"Note that our current projections do not contemplate any software revenue, although at launch Oculus will be offering a number of made-for-VR games and video content from partnering developers and content owners – which include Sega, Lionsgate, Fox, Twitch, Hulu, and Vimeo. Net-net, we expect Facebook will grow hardware revenue generated from Oculus at a 4% five-year CAGR from $2.1 billion in FY16 to $2.6 billion in FY21."

"However, given our assumption that Facebook will once-again demonstrate a willingness to forgo near-term monetization in return for increased product adoption, we are modeling an initial negative gross profit impact from the initiative – with Oculus gross margins reaching breakeven by 2021 and contributing ~$50 million in gross profit by FY22."

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