Street weighs in on WhatsApp deal; FB -3.6% premarket

Unsurprisingly, the sell-side leans negative on the deal, but the Jefferies team says the purchase reminds it of Google's 2006 acquisition of YouTube "where valuation is based on longer-term monetization potential of a disruptive asset." Facebook (FB) remains a Buy at Jefferies with $80 price target.

"To justify $19B, WhatsApp would need to generate around $1B in annual cash flow by our model's terminal year of 2018," says Pivotal Research. "However, few data-points to support such an assumption were provided by the company, as evidently few are available." The team downgrades to Hold from Buy.

Facebook is paying about $42 per WhatsApp user even though said user generates $0.99 per year in revenues, "suggesting a decades-long payback under WhatsApp's current business model, should new user growth slow," writes Evercore's Ken Sena, cutting the stock to Equal Weight with price target lowered $10 to $60. He notes Viber, an alternative to WhatsApp with roughly two-thirds the scale and comparable growth, recently sold to Rakuten for $900M. Sena and team also have separate concerns about engagement in the 18-24 year old demo.

Bernstein's Carlos Kirjner: "[The deal]" suggests limitations on how far the business can be extended beyond"

Facebook is off 3.6% premarket

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Comments (14)
  • andypochta1
    , contributor
    Comments (1305) | Send Message
    Except Google paid $1.6B for youtube, 12 times less
    20 Feb 2014, 08:08 AM Reply Like
  • Ashraf Eassa
    , contributor
    Comments (9713) | Send Message
    I think it's sliding because people are realizing how much of a bubble FB is; the acquisition itself was smart.
    20 Feb 2014, 08:22 AM Reply Like
  • Squeeky Wheel
    , contributor
    Comments (350) | Send Message
    The acquisition is smart; it's the price that is stupid.
    20 Feb 2014, 09:21 AM Reply Like
  • permanent
    , contributor
    Comments (490) | Send Message
    FB is about data collecting from it´s users where WA was about privacy. I personally don´t use FB since I am not willing to share my life for commercial reasons with Zuckerberg.
    20 Feb 2014, 08:44 AM Reply Like
  • millerleila
    , contributor
    Comments (109) | Send Message
    Yeah, it`s complicated. It`s Sandberg ( former vicepresident of Google) partners around of Google who sell this stuff to Facebook. And Instgram too. Sequoia Capital. Bad news to FB shareholders.
    20 Feb 2014, 09:27 AM Reply Like
  • analysis well
    , contributor
    Comments (19) | Send Message
    Considering the fact that the street talks of always looking at fundamentals and the facts debt to asset ratio , cash flow, balance sheet ect ..... They also say lookp at past track records and growth . All of which FB has greatly exceeded expectations , so now to come out with a negative goes against the grain of the fundamentals. We must not forget the intelligence or strategic moves this company has made to consistently better itself. Whom ever would say hold vs buy is regretting the fact they don't own more shares and wants it to fall in hopes to buy or get in at all. You cannot flip flop when you do it's shows you are only interested in manipulation and playing a game . I believe in face book , it's story and truth ..... And see it being the next google in the future if we don't lose sight of its past accomplishments and it's desire to be the best in what it does . Thank you
    20 Feb 2014, 09:36 AM Reply Like
  • kata
    , contributor
    Comments (1459) | Send Message
    Kudos to Mark, one smart cookie.
    20 Feb 2014, 10:31 AM Reply Like
  • Eric Jhonsa
    , contributor
    Comments (1276) | Send Message
    On an MAU basis, it looks like Viber's scale is less than 1/4 of WhatsApp's. While Viber has over 300M registered accounts (hence Evercore's 2/3 comparison), Viber has only 105M MAUs to WhatsApp's 450M. Also, Viber only managed to have $1.5M in revenue last year, which suggests to me their daily engagement (on average) is well below WhatsApp's.


    WhatsApp is the 800-lb. gorilla here, at least outside of China (Tencent), Korea (Kakao), and Japan (Line). Still an expensive acquisition though.
    20 Feb 2014, 10:48 AM Reply Like
    , contributor
    Comments (16) | Send Message
    Still........GOOG is unreachable for some. I'm hoping the same for FB some day. Zuckerberg isn't where he is from making bad choices. I'm keeping the faith.
    20 Feb 2014, 11:23 AM Reply Like
  • Mark Krieger
    , contributor
    Comments (6379) | Send Message
    it was a crappy deal for everybody but Whatapps and the Federal government (they stand to bring in $6 b to their coffers)
    20 Feb 2014, 11:54 AM Reply Like
  • RobbyRob
    , contributor
    Comments (362) | Send Message
    Gonna close in the green today. Gotta love this market. FB should buy whatever computer app/algo is pulling its stock today.
    20 Feb 2014, 02:03 PM Reply Like
  • StepUp
    , contributor
    Comments (553) | Send Message
    Things that are cheaper than WhatsApp:
    21 Feb 2014, 12:21 PM Reply Like
  • permanent
    , contributor
    Comments (490) | Send Message
    interesting alternative:
    21 Feb 2014, 12:39 PM Reply Like
  • Better
    , contributor
    Comments (26) | Send Message
    What app did Facebook just buy? With many wireless carriers offering affordable unlimited text and calling plans (Verizon's everything more plan is just $45 per month), this app will become obsolete.. $19 billion is an expensive price to pay for a dinosaur fossil.
    23 Feb 2014, 10:06 AM Reply Like
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