Wall Street sees sense in Facebook's $19 billion WhatsApp buy
Wall Street sees sense in Facebook's $19 billion WhatsApp
Now, it has a significant opportunity to be the leading global communications utility," RBC Capital
Markets said in a note.
Analysts have commended Facebook's ability to make money from its mobile app. YouTube)
justifying valuation over time," SunTrust Robinson Humphrey's Robert Peck said in a note.
Facebook is paying $42 per user, compared with a market value per user of $170 for Facebook and
$212 for Twitter, Deutsche Bank's Ross Sandler said.
(Reporting by Soham Chatterjee and Saqib Iqbal Ahmed in Bangalore; Editing by Saumyadeb
Chakrabarty and Lisa Shumaker)
The company's $1 billion deal to buy photo-sharing application Instagram in 2012 and its recent $3
billion failed overture to buy SnapChat - used by teenagers to send texts and photos that disappear
after a few seconds - followed unsuccessful attempts to develop rival apps.
Of the 44 analysts who cover Facebook, 37 have a "buy" or a "strong buy" rating on the stock,
according to Thomson Reuters data. Now they will want to see how it will earn money from the chat
app's huge number of users.
Analysts said the price tag for WhatsApp, founded in 2009 by former Yahoo Inc employees Jan Koum
and Brian Acton, seemed reasonable from the point of view of value per user.
But analysts noted that WhatsApp has over 450 million users and boasts a higher level of
engagement than Facebook.
By Soham Chatterjee and Saqib Iqbal Ahmed
HAVE SCALE, WILL MAKE MONEY
Facebook has been buying apps with large numbers of young users as part of Chief Executive Officer
Mark Zuckerberg's strategy of helping users share any kind of content with anyone.
WhatsApp's user base is less than half that of Facebook's 1.2 billion but the chat program's users are
more active. The purchase price is slightly more than the market value of Sony Corp.
Asian rivals such as Tencent Holdings Ltd's WeChat, Naver Corp's Line and Rakuten Inc's Viber are
well ahead of Facebook messenger across much of Asia.
"Looking past the sticker shock of $19 billion ... WhatsApp's users are expected to reach 1 billion by
2015, according to many analysts.
(Reuters) - Facebook Inc's purchase of fast-growing messaging startup WhatsApp for an eye-popping
$19 billion largely won approval from analysts, who said the deal made strategic sense as it will
solidify the social network's position as a leader in mobile.
Pivotal Research's Brian Wieser, who downgraded his rating on Facebook shares to "hold" from
"buy," said he expects Facebook shares to face pressure in the near-term as investors come to terms
with the risk of future acquisitions.
Thu Feb 20, 2014 4:39pm EST
Facebook has fallen behind in mobile phone messaging apps in emerging markets, where many are
accessing the Internet on fast-growing 3G mobile networks for the first time on smartphones.
At least two brokerages downgraded their recommendations on Facebook to "hold" but the
overwhelming majority of analysts remain positive on the stock.
Still, some analysts said Facebook was paying a high price to keep WhatsApp from being snapped up
by a rival such as Google Inc.
"Large-scale networks like WhatsApp are rare and provide (a) significant monetization opportunity
Analysts estimate WhatsApp users share 19 billion messages, 600 million photos, 200 million voice
messages, and 100 million video messages per day.
"Facebook shares would have been pressured by more than single-digit percentages in after-market
trading if Google had purchased WhatsApp instead," Stifel analyst Jordan Rohan said in a note.
Credit: Reuters/Dado Ruvic
A Whatsapp icon is seen on a Samsung Galaxy S4 phone screen with a Facebook logo in the central
Bosnian town of Zenica, February 20, 2014.
WhatsApp is much stronger than Facebook Messenger in Europe, Latin wall pictures America, Africa
and Australia and has attracted users at a time when it appears that young people are turning away
Facebook is paying more than double its annual revenue for a chat program that has little revenue