Meta Analyst Says Quest Pro Uptake Likely To Be Slow Due to These 2 Reasons

Meta Platforms Inc. (NASDAQ: META) held its Meta Connect 2022 on Tuesday where it showed off its metaverse product slate, announced additional partnerships and also released its next-gen Quest Pro headset.

What Happened: Following the event, KeyBanc Capital Markets analyst Justin Patterson maintained an Overweight rating and $196 price target for Meta shares.

The company's metaverse vision remains a 10+ year endeavor, requiring a decade-long investment, Patterson said in a note. Among the other challenges, "there remains a chicken/egg dynamic between user growth and compelling content," he added.

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While lauding the Quest Pro for its impressive feature set, the analyst expressed doubts regarding its adoption due to the $1,499 price point and limited battery life. The analyst also noted that competition was intensifying, with Apple Inc. (NASDAQ: AAPL) working on its own mixed reality headset, Sony Group Corporation’s (NYSE: SONY) VR2 on its way and Valve working on another headset.

Why It's Important: Patterson said, “Until devices reach mass market price points and move hundreds of millions of units, we believe the metaverse will still be viewed as a niche, with more in common with gaming than social and productivity use cases.”

“In short, we continue to view metaverse discussions as a sidebar to the core debates,” he added.

Since the metaverse vision still remains distant, the health of the core business continues to take center stage, Patterson said. The analyst predicts that the company's fundamental performance will be determined by the level of underlying engagement, the sensitivity of the ad cycle, the extent to which AdTech investments are paying off in terms of investment improvements and the manner in which management is estimating operating and capital expenditures.

Price Action: Meta closed Tuesday's session down 3.92% at $128.54, according to Benzinga Pro data.

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