Here's how two analysts think Instagram could be worth up to $37 billion

Instagram is a $37 billion business, according to Bank of America Merrill Lynch analysts Justin Post and Joyce Tran.

Back in 2012, Mark Zuckerberg made waves for acquiring Instagram for $1 billion.

Instagram added 120 million new users last year. It's also the largest social network outside of China, excluding Facebook.

In a positive note to clients, Tran and Post say they see a potential $4 billion revenue opportunity with Instagram, and a valuation between $30 billion to $37 billion, based on user and potential revenue comparisons to both Twitter and Facebook.

The analysts noted that Instagram had exceeded BofA/Merrill Lynch's expectations. Tran and Post say that Instagram is proving to be a steal for Facebook. The firm maintains its "buy" rating, giving Facebook a $92 price target.

Instagram has 300 million monthly active users - up from 27 million in April 2012 when Facebook bought it - and Instagram users are also on average ~1.8x more engaged than Twitter users.

The analysts note that there's a lot of potential to monetize Instagram, since its user base skews younger - something advertisers want to capture - along with Instagram's visual-heavy nature and how successful Facebook's news feed ads have been.

Instagram users share 70 million photos a day and spend more than 20 minutes a day on the platform.

"While Facebook has 87% of users between 18-29, Instagram likely has higher teen usage (not captured in the Pew Internet survey). Data suggested that the percentage of teens ages 13-17 who use Facebook in the US fell to 88% in 2014 vs 94% in 2013 (per Frank Magid Associates), and the cut back on their Facebook use was in favor of other social networking sites like Instagram," the analysts noted.

Instagram started advertising on its platform in late 2013 in the US, bringing in clients like PayPal, General Electric, Macy's, Burberry, and Starbucks. Instagram included analytical tools, including the ability for its clients to leverage an Instagram user's Facebook data for ad targeting.

In addition, Instagram launched advertising campaigns abroad in 2014, for brands in the UK, Australia, and Canada. Instagram is global, and more than 70 percent of its users are located outside the US.

In October, Instagram rolled out video ads from four launch partners.

The analysts note that there are two primary reasons why Instagram can provide mobile advertising potential for Facebook: it lets Facebook's advertising platforms reach teens and young adults, and provides greater reach for advertisers. The analysts estimate that Instagram advertising revenue could grow to near $1 billion in 2017 and $3.9 billion by 2020.

"We expect the company to be able to bring more relevant content and connections to more people, and continue to deepen their engagement with photo and video sharing. We view the growth of mobile usage as a key driver, estimate monthly active users could exceed a half a billion by 2016," the analysts say, adding that they expect Instagram advertising to include both display news feed picture ads and online video ads placed between user-generated posts on the platform, mimicking Facebook's existing news feed display ads and autoplay video ads.

Based on Instagram's current user trends, the analysts say, the platform could have a valuation "at least on par with Twitter's $33bn in market cap."

If Instagram can follow through and continue growing, it'll make Zuckerberg's $1 billion 2012 purchase look like the greatest steal of all time.