Facebook, Inc. FB shares were reacting to multiple analyst updates in Tuesday's session. After Pivotal Research downgraded shares of the social media giant to Sell, BofA Securities issued a note detailing the company's purported plan to launch WhatsApp payments in India.
Exploring India's Crowded Payments Market
The National Payments Corporation of India provided permission to begin operating WhatsApp Pay in a phased manner, according to a report in Business Standard that cited an unnamed source.
In the first phase of the rollout, WhatsApp is to be made available to 10 million people, the report said.
The WhatsApp messaging service has about 450 million users in India, said BofA analyst Justin Post, citing Counterpoint Research.
" ... We see the launch in India as validation that WhatsApp is ready to expand its use case where there are biggest opportunities," the analyst said.
The B2C fintech market in India is crowded with big players like Amazon.com, Inc. AMZN Walmart Inc's (NYSE: WMT) PhonePe, Alibaba Group Holding's BABA PayTM and Alphabet Inc's GOOGL GOOG Google Pay, according to BofA.
WhatsApp's Problems, Prospects
The B2C market is a low loyalty market, as consumer preferences are dictated by the discounts offered, Post said.
The analyst said WhatsApp has a sustainable advantage, given its 400-million-plus MAU and its status as the default messaging app in India.
WhatsApp monetization on a meaningful scale will take time, primarily due to the nascent stage of the market, low ticket size and the education needed for merchants to transact, Post said.
WhatsApp Optionality A Major Growth Driver
With an adequate discount, BofA sees an opportunity for over $10 billion in payment revenues if WhatApp's global MAUs hit 1.6 billion.
Once payments are established, Post said he sees bigger opportunities for e-commerce or other service transactions on the app with much bigger take rates.
"We remain optimistic on ongoing WhatsApp usage and user growth, and see WhatsApp optionality as an important 3-5 year growth driver that may not be fairly discounted in the stock," the analyst said.
Post has a Buy rating on Facebook with a $250 price target.
Facebok shares were falling 2.66% to $207.40 at the time of publication Tuesday.
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