Meta Connect 2022 preview: Where next for Meta stock?

Josh Warner
By :  ,  Market Analyst

When is Meta Connect?

Meta Connect will be held on Tuesday October 11. The one-day event will be headlined by the keynote speech from Meta CEO Mark Zuckerberg 1000 PT.

It will be held virtually in Horizon Worlds to viewers with a Quest 2 headset in the US, Canada, the UK, Iceland, Ireland, France and Spain.

 

What is Meta Connect?

Meta Connect is an annual event that Meta uses to showcase its progress and plans related to the metaverse- a virtual space where users can interact with a computer-generated environment and other users. This will be the ninth year the event has been held, although it only started to grab attention in 2021 when Meta used it as a launchpad to change its name from Facebook and unveil its new long-term strategy centred on the metaverse. The company describes the metaverse as the ‘next evolution in a long line of social technologies’.

Read more: Top Metaverse Stocks to Watch

 

What to expect from Meta Connect 2022

The company’s decision to pivot so heavily toward the metaverse at last year’s event has set expectations high for Meta Connect 2022 and the programme for the day is jam-packed. The company has kept fairly tight-lipped ahead of the event, but this has not stopped rumours circulating about what to expect. The biggest talking points ahead of the event are on new developments for its existing Meta Quest 2 headset, the launch of its new Meta Quest Pro headset, and updates to its Horizon Worlds and avatar platforms.

Let’s have a look at some of the major revelations that could be made at the event.

 

Meta Quest 2

Much like a mobile phone is now an essential tool needed to interact with the world’s array of digital services, Virtual Reality (VR) and Augmented Reality (AR) headsets act as the hardware portal needed to fully enjoy the metaverse. Meta has been in this space since it bought Oculus for $2 billion back in 2014.

Meta is currently the dominant force in what is still a nascent industry thanks to the popularity of its virtual reality headset named Oculus Quest 2. Only 14 million headsets are forecast to be sold worldwide in 2022, according to International Data Corp (IDC), but Meta investors can take some comfort in the knowledge that the company’s market share stands at over 90%. That monopoly over headsets allows it to drive more people to its exclusive content. Competition remains low for now. Its next biggest competitor is Pico, a company owned by none other than TikTok-owner ByteDance, which has a 4.5% share of sales. The remaining fragment of the market is being fought over between other companies such as Chinese firms DPVR and iQIYI (which is listed but controlled by search engine giant Baidu) and Taiwan-based HTC.

The Quest 2 was released two years ago, and we can expect some updates at the event this year as Meta prepares to stir up excitement ahead of the holiday shopping season. This headset is still, for now, geared toward the gaming market. There is likely to be an update on its plans to introduce the hugely popular Grand Theft Auto title GTA: San Andreas that was unveiled last year and news on other major titles that could be coming to the headset.

However, there is a chance that updates on Quest 2 could be limited depending on how much it wants to save for the Quest 3, which is rumoured to be in the pipeline for as early as 2023 but could be teased at this year’s event. It could be a major upgrade considering some reports it could involve augmented reality as well as virtual reality. Meta is already tinkering with AR through Project Nazare, although an AR headset is not expected to be hit the wider market for several years.

Meta may find things more challenging with the Quest 3 considering competition is expected to intensify with some big names rumoured to be preparing to enter the market. Apple has long been rumoured to be working on its own headset and undoubtedly poses the biggest threat to Meta’s market-leading position. Meta currently boasts a huge advantage over its rivals thanks to the billions of people that already use its services, but Apple also has the power to thrust its new headset in front of a significant audience in a swift manner. Over 1.2 billion people are using iPhones today, and that number only rises when you take its array of other products into account. Put simply, Meta has led the pack unchallenged thus far, but will undoubtedly see its monopoly weaken if Apple enters.

 

Project Cambria and the Quest Pro

One of the highlights of the event will be Project Cambria. This covers its work on a new premium headset that we know, thanks to leaks, will be called Meta Quest Pro. This is a high-end device designed for professional users and businesses, focusing on things like productivity and virtual meetings. Zuckerberg has said he expects people to be ‘blown away’ by the new device.

Much like games consoles, most headsets are currently being sold at a loss and companies are trying to reap back money as users spend more on content. The Quest Pro, which is expected to go on sale before the end of this month, will undoubtedly demand a higher price tag to make headset sales more sustainable compared to the subsidised ones on offer to the wider market. It is expected to be priced at over $800, which is double the starting price for the current Quest 2.

 

Horizon Worlds

Although hardware is vital, it is nothing without software and content for consumers to use and enjoy. Meta is also making progress on the software front, which is set to be a far more complex and competitive part of the metaverse. 

Meta’s ambitions are currently underpinned by its metaverse platforms under the Horizon brand. This includes Horizon Home, designed to be ‘your home in the metaverse’, Horizon Worlds, where new digital worlds are created and shared, and Horizon Workrooms that is embracing the world of remote work by offering VR meeting rooms and other tools. It also has a platform that allows users to create and personalise the avatars they use to traverse it. Meta revealed it already had around 300,000 monthly users in early 2022.

Horizon Worlds will be the central focus this year. Meta is expected to launch a version of Horizon that can work on computers, smartphones and games consoles that will let people engage with the metaverse without a headset before the end of 2022. This will be a big test and gauge the level of early adopters willing to dip their toes in the virtual world. Meta has said it expects this to ‘dramatically increase the number of people who can use Horizon’, although the jury is still out over how popular this will be through a standard screen and without the immersion on offer from a headset.

 

When will Meta make money from the metaverse?

The company is spending big on its metaverse ambitions. Its Reality Labs division that homes its metaverse operations has lost over $16 billion since the start of 2021 alone and it is set to burn through significantly more cash before returning any rewards.

Zuckerberg admits that this is a ‘very expensive undertaking over the next several years’ but believes that this will lead to a major payoff eventually. Investors should prepare to be patient. Reality Labs is set to account for just 2% of Meta’s overall revenue this year and next, and Zuckerberg has said the company is working on ‘laying the groundwork for what I expect to be a very exciting 2030’ to imply investors shouldn’t expect much for years to come.

Reality Labs lost $6.6 billion in 2020 and another $10.2 billion in 2021. This is expected to keep swelling to $11.9 billion in 2022 and another $12.3 billion in 2023.

Meta is spending big on its metaverse ambitions

 

As far as investors are concerned, the metaverse must reap rewards considering the company is sinking tens of billions of dollars into it. The transition from social media platform to a fully functioning (and more importantly, sustainable and profitable) metaverse operator is no small feat. The fear is that the current Meta – driven by Facebook, Instagram and WhatsApp – is reaching its peak before the metaverse has even taken off.

Meta has set expectations high after pivoting itself so heavily toward the metaverse and investors will only become more impatient the longer it takes and more expensive it becomes.

 

What will Connect 2022 mean for Meta stock?

The Meta share price rose 1.5% on the day of Meta Connect 2021 and rose over 7.5% during the week after the event, although this was driven by the headline-grabbing decision to change its name and pursue its metaverse ambitions.

The event will undoubtedly reveal some exciting developments, but it is unlikely to provide much for investors to get their teeth into. At the bottom-line, the company is years away from making money from the metaverse and it will continue to be driven by the core advertising business on Facebook and Instagram. The event gives Meta the opportunity to convince investors that it has the right strategy, but it is rightly focused on wowing consumers and impressing developers in order to increase adoption.

There are several big-name companies working on potentially game-changing ideas that they see vital to their future. Tesla showed off its humanoid robot named Optimus at its own AI Day event last month. It managed to walk by itself and wave to the crowd, with additional videos showing it carrying boxes and watering plants, and an upgraded version that was wheeled out is underpinning hopes that it can mass-produce a model ‘as soon as possible’ that could cost less than $20,000. But, for now, as impressive as these breakthroughs are, they are costing significant sums of money and these events about virtual worlds and robots remain a distraction at a time when their actual businesses are under pressure in a tumultuous environment.

 

Where next for Meta stock?

Meta shares recently hit their lowest level in almost four years in late September after falling almost 60% since the start of 2022, making it one of the worst performers in the Nasdaq 100 this year.

The stock briefly entered oversold territory when it hit that low of $134.12, attracting buyers back into the market and providing some support. This needs to hold to avoid opening the door to the $131.12 level of support seen in late 2018. A break below here could be more significant as it brings the 2018-low of $123.00 into play. Average trading volumes have been on the rise while the stock has sunk lower, with the 10-day average some 11% above the 100-day average, to suggest the current downtrend could be gaining momentum.

The stock is currently testing the pandemic-induced low of $139.75, making it the first upside target for the stock. From here, it can target a bigger jump to recapture the $155.20 level of support during the four months to mid-September. The 50-day and 100-day moving averages them come into view to provide a ladder toward $172 and then to the $183.60 ceiling that has capped the share price since June.

Meta shares are rebounding after hitting their lowest level in almost four years

 

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