Sterne Agee analysts Arvind Bhatia and Brett Strauser have increased their target price for Facebook stock to $32 based on what they believe is the impending "monetization" of Instagram, the photosharing service Facebook bought for $1 billion before its IPO.
Their theory is that Facebook's recent tweak of its terms of service paves the way to allow advertisers to buy space in Instagram users' photostreams.
Here's the relevant section from their note to investors today:
Instagram Monetization Coming Soon? Facebook recently proposed changes to its data use policy and statement of rights and responsibilities that will, in short, enable the company to share information with affiliates like Instagram. While the monetization of Instagram is something investors largely expect, the main question has been the timing. This change could be an indication that Facebook is planning to monetize Instragram in the near future, as it would allow Instagram to use Facebook’s data to personalize the Instagram user experience and perhaps target advertisements. We note that Instagram currently has approximately 39M monthly active users, according to AppData. We believe most estimates currently do not factor Instagram monetization yet due to the uncertainty on the timing.
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