Facebook (FB) Messenger Monetization Could Be Coming - Stern Agee CRT

Stern Agee CRT analyst, Arvind Bhatia, thinks that Facebook (NASDAQ: FB) will introduce ads on its FB Messenger platform in the next few months, which is not in most sell-side/buyside estimates yet. This also may bode well for near-term monetization of WhatsApp, a 25% larger platform than Messenger. No change to the Buy rating or $135 PT.

It increasingly looks likely that in the next few months, FB will introduce ads on Facebook Messenger, a platform that now has more than 800 million users. Importantly, this is currently not in the Street’s estimates for this year as most did not expect any monetization until Messenger reached 1 billion users.

The potential introduction of ads on Messenger in the near future bodes well for near-term monetization of WhatsApp, which is already 25% larger than FB Messenger today, having crossed 1 billion users recently. This is also not in the Street’s estimates for 2016.

Meanwhile, Instragam continues to grow at a rapid pace - more than 100% annually or more than 2x the rate of FB’s overall growth rate. It could contribute to as much as 10% of FB’s ad revenue in 2017. In 4Q’15, Facebook’s mobile ad revenue was up 82% y/y, above 3Q’s 72% y/y growth rate and Instagram was a key contributor to this acceleration.

For an analyst ratings summary and ratings history on Facebook click here. For more ratings news on Facebook click here.

Shares of Facebook closed at $105.46 yesterday.

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