Facebook’s decision to acquire WhatsApp and Instagram is seen as a multi-billion dollar opportunity by analysts at BofA/Merrill Lynch. The research firm recently showed bullish sentiment on Facebook, maintaining its Buy rating and assigning it a price target of $92.
Sharing images getting popular on Facebook
Analyst Justin Post noted that the social network appears to be an optimistic picture ahead with the acquisition of WhatsApp and Instagram. Post thinks that once these platforms start posting revenue, their huge user bases and higher engagement levels will turn out to be positive growth driver, thus inching Facebook stock up.
Facebook-owned Instagram is an online image and video sharing mobile social network service that enables users to upload images and videos, sharing them with friends and followers. The success rate of the app can be gathered by the fact that everyday around 70 million photos are shared on the platform daily with 2.5 billion daily likes. Users across the globe spend more than 20 minutes daily on Instagram.
The analyst holds the view that sharing images is getting increasingly popular among the young audience of Facebook, preparing a solid turf for Instagram to sprint ahead. After studying the user and potential revenue comparison to Twitter and Facebook, Post thinks Instagram has the potential of earning over $4 billion in revenue with a potential valuation range of $30 billion and 37 billion.
WhatsApp presents massive monetization opportunity
WhatsApp, another acquisition of Facebook, allows its users to chat without any charge. The instant messaging app’s user base totals 700 million on a monthly basis with 30 billion messages sent daily. Post expects WhatsApp to generate revenues of more than $4 billion, assuming $5 in revenue per user. If WhatsApp earns revenue only through ads, then it is expected to earn around $1.5 billion in revenue. The analyst noted that the messaging app, depending on the way it is monetized, offers a potential valuation range of between $13 billion and $32 billion.
“While our valuations may be on the more bullish side, we see opportunity for FB multiple expansion as these assets begin to monetize (even at lower valuations),” said Post.
On Monday, Facebook shares closed up 0.03% at $78.07, while year to the date, the stock is down almost 2%.