NEW YORK (TheStreet) -- The social networking market, especially the mobile part of it, is beyond white hot, and Facebook (FB) is the most well known of the group.
With the recent purchase of WhatsApp, not only has Facebook strengthened its dominance in mobile messaging, but the acquisition could wind up being a huge money maker for the company as well.
Sterne Agee analyst Arvind Bhatia raised his price target to $80 on the social networking giant on the view that WhatsApp allows Facebook to monetize in a completely new way. Bhatia says WhatsApp, which currently has around 465 million users, could reach 2 billion by users by 2021 and generate $3.65 billion in revenue that year, with an 80% EBITDA margin.
"Long-term we think WhatsApp could reach 2B users and generate ARPU of $2.50 at 80% margins," Bhatia wrote in the note.
Facebook shares were higher in early Wednesday trading, up 0.5% to $70.20.
Bhatia also boosted 2015 and 2016 revenue estimates significantly due to the pending purchase. He now expects Facebook to generate $14.3 billion and $18 billion in revenue in 2015 and 2016, up from a prior view of $14 billion and $17.3 billion, respectively.
With the advertising market being a $600 billion global market, Facebook is quickly becoming a dominant player, judging by the company's fourth-quarter results.
The Menlo Park, Calif.-based social network earned 31 cents per share on $2.59 billion in revenue, as advertising revenue jumped 76% year-over-year to $2.34 billion. "While growth with brand marketers has been good, we believe FB would like to see stronger growth in this segment and believe this represents an opportunity in the medium term," Bhatia penned in his note.