Nov 13, 2019 (Investing Alerts) -- Facebook is known for its ups and downs in the stock market. Last year the company had a one-day loss higher than ever seen. This came directly after the second-quarter earnings report was released. The report disclosed that the company's spending would increase.
Several times exist when the stock has sunken because of scandals or branding issues. Those harsh instances do not reflect the current state, since Facebook continues to grow. They are only 10% under their valuation before the plummet last year.
So how is Facebook still experiencing exponential growth, in such a short time from their darkest days? This leads us to the influence of the company's related applications WhatsApp and Instagram on the overall stock.
Figures for profits from the major social media platform is not easily seen. Profits and revenues of Whatsapp and Instagram are not shared with the public, so it is unclear the exact numbers the company is incorporating into their Facebook stock. All of the numbers are predicted with consideration of the scale of other similar stocks, and the overall valuation of Facebook.
Facebook is still trending, and leading, the social media platforms. The stock is not steady and there have been many privacy cases surrounding the social giant.
Where Facebook is failing, WhatsApp and Instagram are picking up those fallen-off consumers with their unique social networking style. Each app has their own audience, since interaction is approached differently in all three.
This value can be broken down with help from Bloomberg. Bloomberg estimates Instagram's value to be upwards of $100 billion. It projects instagram will have 5 billion monthly users within the next five years.
Last year, Bloomberg estimated Instagram made up 15% of the company's total revenue. Most of Instagram's numbers are made by comparing it to Snap /zigman2/quotes/205087158/composite SNAP +4.43% and its valuation trends to its user rates.
Instagram is estimated to bring in $12 billion of revenue this year, according to the rate Snapchat's users generate revenue for the company. It is even possible Instagram is worth more per userbase, as it is growing at a larger scale.
Instagram is interacting with customers and businesses on a scale to almost match Facebook. With the amount of users searching for an Instagram growth agency , there is no shortage of those creating business and public profiles and communities around the platform.
WhatsApp is a bit more difficult to gauge the value of. To begin, WhatsApp was purchased at $19 billion, but their user-base has tripled. The app began with 450 million users and now the number tops 1.5 billion.
That does not mean the value of Whatsapp has matched that tripling. We truly do not know the amount Facebook profits from Whatsapp, and the valuation of facebook has been critiqued heavily by financial leaders.
Whatsapps earnings can be judged using what we know about Twitter's value vs user rate. Twitter /zigman2/quotes/203180645/composite TWTR +0.30% had an enterprise value of $25 billion in 2018. They had 321 million MAUs. Using this scale with WhatsApp's MAUs, the company would have an evaluation of $125 billion.
Estimating Instagram at $ 125 billion and WhatsApp at $100 billion would make up a large portion of Facebook's projected $280 billion . With cash transaction, Facebook, itself, will only generate around $20 billion dollars of the stock.
Facebook has a safety-net in place where even if they lose users, it is more likely for them to move to Instagram. This is if they do not cut ties with all social media. Instagram and Whatsapp do play as protection to the Facebook stock, rather than competition.
With this information, even if Facebook stumbles in the stocks, it is still a dependable investment because of its non-Facebook social media applications.