NEW YORK (TheStreet) -- As Instagram's 400-million user milestone proves it seemingly has no boundaries, Facebook's (FB) - Get Report is ready to reap windfalls in the upcoming quarters, analysts say.
The fact that the photo-sharing platform has generated 400 million users in just five years, with about 80 million pictures shared per day, is impressive and gives investors confidence in Facebook's ability to make money with ads, according to analysts.
"This is remarkable," said Shebly Seyrafi, managing director of technology and Internet research at FBN Securities, in a phone interview with TheStreet. He estimated 63% year-over-year growth for Instagram, with Facebook only reporting user numbers sporadically. Facebook said Instagram had more than 200 million users as of the first quarter of 2014 and more than 300 million users as of December 2014.
"Mark Zuckerberg knows what he's doing when he makes bids for these companies," Seyrafi said, pointing out that Facebook's rumored bid $3 billion for Snapchat in 2013. While that bid was turned down, Snapchat was recently valued at $16 billion after arecent fundraising. "Instagram is going to be a strong growth driver for the company for the next several years -- and I think it's going to continue to grow quite rapidly."
Much of Instagram's user-base surge lately has come from abroad, with more than half of the last 100 million to join coming from Europe and Asia, particularly Brazil, Japan and Indonesia, Facebook said in a statement. In fact, about 75% of Instagram's user-base lives outside the U.S.
Instagram ads, now available in more than 30 countries, including Italy, Spain, Mexico, India, and South Korea, will launch worldwide Sept. 30 in time for the holiday season.
Shares of Menlo Park, Calif.-based Faebook shares were up more than 1% in Wednesday's session, with the stock up 19.3% year-to-date.
Investors had been questioning whether the fact that Facebook had not recently provided user figures indicated stagnant growth, but the 400-million mark quickly squashed doubts, said Axiom Capital Management analyst Victor Anthony in a Sept. 23 note.
"Instagram's user growth is meaningfully faster than another highly visible social network," said Anthony, pointing out that Twitter's (TWTR) - Get Report growth has actually slowed recently. Axiom has a "buy" rating and a $120 price target on Facebook.
Instagram's integration with Facebook after buying it in 2012 for $1 billion in cash and stock has certainly helped drive more growth for Instagram, Anthony said said. The analyst now believes Instagram is on track to eclipse 1 billion users just as Facebook did.
Seyrafi said there is the expectation that Instagram really starts to generate revenue next year, despite already having sponsored posts available. "Instagram is one of several growth drivers -- Facebook has really shown itself as a premier Internet property," the analyst said. "I'm very positive on Facebook, it's one of my top picks."
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.