Pro Analysis

Facebook to rally 24 percent as virtual reality technology improves, Morgan Stanley says

Mark Zuckerberg, chief executive officer and founder of Facebook Inc., demonstrates an Oculus Rift virtual reality (VR) headset and Oculus Touch controllers as the gives a demonstration during the Oculus Connect 3 event in San Jose, California.
David Paul Morris | Bloomberg | Getty Images
Mark Zuckerberg, chief executive officer and founder of Facebook Inc., demonstrates an Oculus Rift virtual reality (VR) headset and Oculus Touch controllers as the gives a demonstration during the Oculus Connect 3 event in San Jose, California.

Investors should buy Facebook shares as the social network's virtual reality business expands to new markets and the entry cost for Oculus VR becomes cheaper, according to Morgan Stanley, which reiterated its overweight rating.

"VR is in the earliest innings with software/hardware barriers to clear (we put Oculus in FB's 10 year bucket), but the initiative continues to progress," analyst Brian Nowak wrote in a note to clients Monday.

The analyst attended the Oculus Connect 3 developer conference last week and talked with developers and engineers about Facebook's virtual reality technology.