Analysts just reiterated their 12-month price target for Facebook Inc. (Nasdaq: FB) at $91. That's a near 12% increase from where FB stock trades today. It closed Thursday at $79.42, up 3.53%.
The target is in a large part thanks to Facebook's photo sharing arm, Instagram.
Industry experts at Cowen Group said Thursday morning that Instagram is presently worth a whopping $33 billion. Cowen's eye-popping call followed Citigroup's lofty $35 billion valuation made in December 2014.
Cowen wrote in an investors' note it believes the number of Instagram's monthly active users (MAUs) will more than double over the next five years. The investment firm also noted that Instagram users are a highly engaged bunch. It added that member count continues to grow at a quick clip.
"Instagram ended 2014 with 300 million users versus 200 million in March, adding 400,000 users a day," Cowen's John Blackledge told CNBC's "Squawk Box" Friday morning.
Cowen estimates Instagram will help Facebook generate $5.8 billion in revenue by 2020. In Q4 2014, FB reported revenue of $3.85 billion.
Citigroup analysts, meanwhile, have an even higher valuation on Instagram.
Instagram's Value to FB Stock
In late December, Citi lifted its Instagram valuation from $19 billion to $35 billion.
Citi analysts cited newly introduced ads on Instagram for the upward revision. They said the photo-sharing app could quickly become a meaningful contributor to Facebook revenue.
"While Instagram is still early in monetizing its audience and data assets, and its financial contribution is minimal today, we believe that it is quickly gaining monetization traction and would contribute more than $2bn (billion) in high margin revenue at current user and engagement levels if fully monetized," Citi wrote.
Citi's analysts also pointed out that Instagram's audience is larger than Twitter Inc. (NYSE: TWTR). According to Citi, its users are 1.8 times more engaged, and user growth has been much heftier than at the micro-blogging site. Indeed, Instagram's user base has grown 10-fold since 2012.
As a result of their increased Instagram valuation, Citi also hiked its price target on Facebook stock.
It went up from $86 to $91.
The current rosy outlook for Instagram is a stark contrast to the questionable stance professionals maintained on the mobile photo-sharing app some three years ago.
When Facebook bought Instagram on April 9, 2012, for $1 billion in cash and stock, investors and industry experts balked at the hefty price. Instagram at the time had no revenue and just 30 million users.
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Today, Instagram's valuation ranges from $33 billion to $35 billion. Its user base has climbed to 300 million. And, the app accounts for about 16% of Facebook's roughly $222 billion market cap.
Moreover, analysts and big money players are now widely bullish on Facebook.
According to fresh regulatory filings, large intuitional investors have been bulking up on FB shares. FMR, Vanguard, and BlackRock recently added shares to their portfolio. That was on top of the 4%, 9%, and 12%, respectively, the trio bought in the prior period.
And of the 48 analysts covering the stock, the consensus rating is "Buy."
Thirty-six analysts rate FB "Buy." Five maintain an "Overweight." Six have a "Hold" rating on shares. Just one sole analyst rates FB "Sell," according to The Wall Street Journal. The median price target is $90, with a high target of $107.
At $79.80, FB stock is up 2.28% year to date.
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Related Articles:
- New York Times: Citigroup Says Instagram Is Worth $35 Billion
- USA Today: Is Instagram Worth $33 Billion?
- Yahoo Finance: Facebook Investors 'Like' Cowen's $33B Valuation on Instagram