The Facebook stock price closed at a 0.8% loss from its opening price yesterday (Wednesday) after CEO Mark Zuckerberg made a very generous announcement. He plans to donate 99% of his FB shares to charity to help cure disease, connect people, and build stronger communities.
Zuckerberg's shares are currently valued at $45 billion, and he plans to donate them throughout his lifetime, according to The New York Times. The money will be handled through an organization Zuckerberg and his wife are establishing.
Zuckerberg's donations of Facebook stock are certainly noteworthy, but that isn't the reason the Facebook stock price fell yesterday.
You see, investors are more concerned with Zuckerberg taking a leave of absence from Facebook Inc. (Nasdaq: FB) because of the birth of his daughter, Max. On Nov. 20, Zuckerberg announced on Facebook that he was going to take a two-month leave of absence. Even though the company allows up to four months of leave, FB investors still did not like the idea of Zuckerberg stepping away from the helm for any period of time.
Following his announcement on the weekend of Nov. 20, FB stock opened at $107.19 the next Monday and closed at $106.08.
The Facebook stock price today is experiencing a temporary pullback, but that shouldn't cause FB shareholders to panic.
Facebook's latest earnings report should provide plenty of confidence for shareholders during Zuckerberg's absence. The social media giant reported earnings per share (EPS) of $0.57 on $4.5 billion in revenue. That easily beat Wall Street's expectations of $0.52 on $4.37 billion in revenue.
Aside from strong earnings, Facebook also posted healthy user growth. Facebook reported a 14% gain in monthly active users (MAUs) in Q3 2015 from the same time in 2014, and FB also beat Wall Street's expectations of 992 million daily active users by reporting 1.01 billion users.
You see, Zuckerberg has built Facebook up on sound fundamentals. He dominates the social media landscape, and he hasn't even monetized his 2014 purchase of WhatsApp, a messaging service with 900 million users as of September.
Facebook is also gearing up for a highly anticipated product. The potential revenue generation from this launch is astonishing, and management consulting firm Digi-Capital expects this product's industry to generate $150 billion in revenue by 2020.
When it's released, this product could add billions of dollars to Facebook's bottom line. Here's what it is...
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The Facebook Stock Price Will Continue to Rise from Virtual Reality
On March 25, 2014, Mark Zuckerberg announced his acquisition of virtual reality company Oculus VR.
Much like his purchase of Instagram, Zuckerberg was wildly criticized for purchasing a company that seemed to have no connection to Facebook's core competencies. Zuckerberg paid $2 billion in cash and Facebook stock for Oculus VR.
But if Instagram provides any indication of what to expect for Oculus VR, Facebook shareholders can expect years of solid returns...
Facebook purchased Instagram in 2012, and many pundits wondered how the $1 billion purchase, which didn't generate money, would have any impact in contributing to Facebook's bottom line.
In 2015, Zuckerberg proved himself as a true visionary.
Instagram surpassed Twitter Inc. (NYSE: TWTR) in MAUs in September with 400 million, but more importantly, 2015 was also the first year that Zuckerberg established monetization for Instagram. The photo app will generate nearly $600 million dollars in 2015 in ad sales, according to eMarketer. By 2017, eMarketer projects Instagram will earn $2.81 billion in ad sales.
Oculus VR's flagship product is Oculus Rift, which is a virtual reality headset. Although there aren't any concrete dates, Facebook plans to start selling Oculus Rift by Q1 2016.
Even though the virtual reality market is expected to generate $150 billion in revenue as previously mentioned, many Facebook shareholders aren't aware of the exciting possibilities virtual reality can offer.
Most people would assume Oculus Rift will be used for games, but Zuckerberg stated it will have a much bigger impact.
"Immersive gaming will be the first, and Oculus already has big plans here that won't be changing and we hope to accelerate," Zuckerberg said in a Facebook post last year. "But this is just the start. After games, we're going to make Oculus a platform for many other experiences. Imagine enjoying a court side seat at a game, studying in a classroom of students and teachers all over the world, or consulting with a doctor face-to-face - just by putting on goggles in your home."
Some Wall Street pundits still can't wrap their heads around the fact that Facebook has evolved beyond its "Status Updates" and "Likes," which is why Money Morning readers may not be familiar with all the capabilities and profitability of virtual technology.
You see, there's a much bigger picture when it comes to Oculus Rift and virtual reality technology. Facebook didn't buy Oculus VR for users to play video games. Zuckerberg bought it to establish a foothold in a billion-dollar industry.
From Oculus Rift to WhatsApp to Instagram, the momentum of the Facebook stock price is not going to stop anytime soon.
Jack Delaney is an associate editor for Money Morning. You can follow him on Twitter and follow Money Morning on Facebook.
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