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Facebook (NASDAQ:FB) Slow to Monetize 900M WhatsApp User Opportunity

Facebook WhatsApp

Facebook Inc. acquired WhatsApp for $19B in 2014.  People found it difficult to understand why Facebook spent so much on a service that didn’t sell ads or have a clear business model. It appears that the main reason Facebook bought WhatsApp was the user-growth prospects. Last Friday, Jam Koum (WhatsApp co-founder) posted that WhatsApp now has 900M monthly active users and is on track to reach 1 Billion soon.

Facebook Inc (NASDAQ:FB) WhatsApp

WhatsApp has had a great growth story with 450M MAUs even before Facebook bought it – and now, it has soared to greater heights under the Facebook banner. In January, it was reported that WhatsApp had 700M monthly active users, by April the number has jumped to 800M monthly active users and now 900M MAUs– a 1B monthly active user base is in sight. The growth seen in WhatsApp is creating buzz about what Facebook’s plan for monetizing WhatsApp will be.

Analysts says WhatsApp and Messenger are not priced into Facebook stock

U.S. stock markets will open with the next two hours and the shares of Facebook are up 1.31% in pre-market trading; hence, the stock will open around $89.50. Yet, analysts opine that the stock is undervalued because the value of WhatsApp and Messenger has not been valued into its share price.

To start with, Ross Sandler, an analyst at Deutsche Bank thinks that Facebook is worth at least $100 per share as she expects a “meaningful upward estimate revision over the next 2-3 years as the family of apps outside of core FB start to monetize.”

Analyst Ronald V. Josey at JPMorgan posits that the shares of Facebook are worth at least a $101 trading price. He believes that “engagement and MAUs continue to ramp” on Facebook’s assets such as WhatsApp, Messenger, and Instagram “could lead to material revenue growth going forward.” He goes on to say, “while we expect this ramp to be measured so as to not disrupt engagement and user growth, we believe we could begin seeing the benefits of the integration as early as 4Q15.”

Facebook has unvalued valuables

Facebook indeed has assets that (when monetized) could open up new streams of income for the firm. For one, Facebook owns the two biggest messaging apps in the world. WhatsApp (owned by Facebook) currently has 900M MAUs, and Facebook Messenger reported in June that it now has 700M MAUs. By comparison, WeChat (serving mostly Asia) that is owned by Chinese firm Tencent has 600M MAUs to take the third position. In essence, the firm has unvalued valuables and it would be interesting to see how the firm monetizes WhatsApp when it has 1B MAUs.

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.

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