After reports that Facebook is scaling back its retail presence for Oculus Rift VR headsets, some analysts are saying prospects for the product are dimming. (Tinxi/Shutterstock)

Following reports thatFacebook (FB) is scaling back its retail presence for Oculus Rift virtual-reality headsets, some analysts are saying prospects for the VR product are diminishing.

Business Insider reported Wednesday that Facebook is closing about 200 of its 500 Oculus virtual-reality demo stations at Best Buy (BBY) stores in the U.S. It said the in-store pop-ups are being closed for poor performance. Some of the pop-ups often would go days without giving a single demonstration, BI said.

"VR seems only to be popular at trade shows." Edison Investment Research analyst Richard Windsor said in a research report. "After a very disappointing 2016, virtual reality looks set to have another disappointing year in 2017 while its proponents work out how to fix the issues that keep it from being a success."

VR headsets aren't cheap, and Facebook's $600 Oculus Rift requires a high-performance PC to run. Compelling content also has been lacking, Windsor said. Plus, some people experience nausea when watching VR videos.

IBD'S TAKE: Facebook is one of the FANG group of closely watched internet stocks, along with Amazon, Netflix and Google-parent Alphabet. Facebook stock has an IBD Composite Rating of 91, meaning it has outperformed 91% of stocks in key metrics over the past 12 months. But it ranks No. 5 out of 54 stocks in IBD's Internet-Content industry group. To see which companies lead the group, visit the IBD Stock Checkup.

"Investor optimism on Facebook's Oculus is totally misplaced," Global Equities Research analyst Trip Chowdhry said in a research note. "Oculus is DOD (dead on departure). (The VR) market does not exist."

"Facebook has been blowing a lot of hot air into Oculus," Chowdhry said.

Facebook bought Oculus in March 2014 for $2 billion and an additional $1 billion in later payouts. Facebook CEO Mark Zuckerberg recently said he plans to spend billions more on developing and marketing virtual reality over the next decade, adding that Oculus "won't be profitable for a while."

Zuckerberg has described virtual reality as the next technology platform for his company's online social network.

Oculus competes with low-cost smartphone-based headsets such as Samsung's Gear VR and video console systems like Sony's (SNE) PlayStation VR.

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Prospects Dimming For Facebook's Oculus Rift Virtual-Reality Headsets - Investor's Business Daily