BlackBerry Ltd To Be Hurt By Facebook Inc, WhatsApp Deal

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BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares received a bit of a lift this past week after it was revealed that Facebook Inc (NASDAQ:FB) is buying WhatsApp for $19 billion. That high valuation of WhatsApp led investors to think that BlackBerry Messenger (BBM) must be worth more than what some have valued it at, which would mean that BlackBerry itself is worth more as well. However, Evercore analysts Mark McKechnie and Zachary Amsel believe that in the long term, the union of Facebook and WhatsApp will be damaging to BBM.

BlackBerry Ltd To Be Hurt By Facebook Inc, WhatsApp Deal

Comparing BBM to WhatsApp

The main reason so many investors saw BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s value go up after the high valuation of WhatsApp is because of the similarities between WhatsApp and BBM. BBM’s functionality is very similar to that of WhatsApp, and BlackBerry has been trying to shift its messaging platform into a more open format. The goal is making it even more like WhatsApp and opening BlackBerry to users of the iOS and Android platforms.

WhatsApp has seen significant growth, which some hope would come to BBM as well. The app’s user base doubled year over year to $450 million and is adding 1 million new users each day. Unfortunately though, the app’s growth may mean bad things for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB), particularly because it is now going to be united with Facebook Inc (NASDAQ:FB). The fact that Facebook is buying WhatsApp will likely mean that Facebook users will automatically adopt WhatsApp rather than looking elsewhere for a messaging service, like, perhaps, BBM.

BlackBerry’s BBM continues to decline

BBM now has 80 million monthly active users, which is significantly lower than WhatsApp, and it doesn’t show any signs of growing to be a size close to WhatsApp. BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s messaging service also has 60% daily engagement, compared to WhatsApp’s 70% daily engagement.

The Evercore team estimates that 70 million BBM users are those who have BlackBerry devices or are on BlackBerry Enterprise Server, which means that BB is the default messaging service for them. They believe the other 10 million are Android users after examining research from Priori about BBM downloads on the Google Play store. The firm estimates that the number of BBM users on iOS is “negligible.”

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) expects to see “reasonably good revenue” from its BBM messaging service in the 2016 fiscal year. However, it has said it sees “negligible revenue” from service activation fees, which are declining in the mid-single digits quarter over quarter. The Evercore team maintains its Equal Weight rating and $7 per share price target on BlackBerry.

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