Meta Platforms (NYSE: META) has slashed the prices of its VR headsets a few months after the launch. While the company said that the price cut is to increase adoption, analysts see it as a reflection of weak demand and rising competition.
Meta lowered the price of its Quest Pro which was unveiled in October last year by $500 to $999. The headset was targeted at corporate users. Many observers saw Quest Pro’s price as elevated when it was unveiled.
While unveiling Quest Pro, the company also announced a partnership with Microsoft and Zoom Video Communications. Under the partnership with Microsoft, Meta Platforms’ VR sets would get Office 365 and Microsoft Teams.
Within months of its launch, Meta slashed the price of Quest Pro. It also lowered the price of VR headsets with 256 gigabytes to $429 from $499.
Meta CEO Meta Zuckerburg said on Instagram that the price cut would get “more people can get into VR.”
The Wall Street Journal reported that according to IDC data, shipments of Meta headsets fell by a massive 90% to just above 300,000 in Q4 2022. While it is still the market leader the shipments were a fraction of their previous highs.
Meanwhile, some analysts don’t buy Zuckerburg’s argument that the price cut is intended to increase adoption. We have an analogy in the electric vehicle industry where incumbents including Tesla have slashed prices amid increasing competition and slowing demand growth.
Is Meta Platforms VR Headset Suffering from Tepid Demand?
Commenting on the VR headset price cut, Jitesh Ubrani, research manager at IDC said, “it’s tough to find buyers for a product that’s been around for this long,” referring to the set’s launch in 2022. He added, “They’ve exhausted first-time buyers and VR enthusiasts.”
Notably, TikTok parent ByteDance shipped 293,000 VR headsets in Q4. While it still trailed Meta, it is fast catching up. While Meta’s shipments slumped in Q4, ByteDance’s Pico headset shipments rose 110% in the quarter.
Meanwhile, despite the price cut, Meta Platforms stock rose over 6% on Friday. While it was the worst-performing FAANG stock of 2022, with a YTD gain of around 54% it is the best-performing FAANG this year.
The stock has rallied this year as markets have given a thumbs up to its cost-cut efforts. Last year, Meta announced 11,000 job cuts and is reportedly looking at more layoffs to cut costs further.
During Meta’s Q4 2022 earnings call, Zuckerburg said that the company wants 2023 to be the “year of efficiency.” Increasing efficiency and productivity were discussed quite prominently during the earnings call. Markets also gave a thumbs up to the efforts and the stock soared after the earnings release.
Metaverse is Still a Work in Progress
During the earnings call, Meta Platforms also announced a $40 billion stock buyback. Zuckerburg reiterated that while the company’s short-term priority is AI, in the long-term, it sees metaverse as a key growth driver.
Some Meta Platform investors have been wary of the company’s metaverse investments which have been a drain on its profits. However, many analysts believe that the metaverse is crucial for the company’s long-term success. There is a list of companies that are a play on metaverse.
AI too is getting good interest from tech giants. Baidu is looking to launch its AI chatbot Ernie in March, ahead of the original schedule. Several companies like Baidu, Nvidia, and Alphabet see AI as a key growth driver.
META is witnessing a growth slowdown. Last year, for the first time ever, Meta Platforms reported a YoY fall in revenues. The lower end of the company’s Q1 2023 guidance implies a fall in revenues. However, the upper end of guidance signals a rise in revenues.
While the company’s growth has slowed down, it is betting on metaverse to drive long-term growth. However, as the cut in VR headset prices shows, the road ahead is not smooth for Meta Platforms.
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