Facbook Inc. (NASDAQ:FB) Needs to Expand Its Operation in China for an Extra $10 Billion

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By Mark Michaels on August 7, 2014 Technology & Software

Facebook Inc. (NASDAQ:FB), one of the biggest social networking site with a total of 1.3 billion MAUs (Monthly active users), has a great opportunity in the country of China. China is one of the biggest internet markets of the world but Facebook Inc. (NASDAQ:FB) is not much active in the respective country.

Heather Bellini, an analyst at Goldman Sachs, who gave Facebook Inc. (NASDAQ:FB) a rating of ‘buy’ with a price target of $85, said that the company can seize a revenue of another $10 billion from the country of China, giving rise to an EPS (earnings per share) of $1.18, if only the company expands its operations in the respective country. According to Heather Bellini, if Facebook Inc. (NASDAQ:FB) successfully enters China by the end of 2017 with a goal of seizing at least 20 percent of its internet market share by the end of 2021, it can easily achieve the EPS of $1.18. It is pertinent to note here that Facebook Inc. (NASDAQ:FB) recently opened up one of its sales offices in the country of China.

Bellini further said that the analysts have not taken into account Facebook’s operations in China in their estimates; however, the numbers can jump up significantly if the researchers assume even very conservative rates in their reports.

During the earlier part of the year, Facebook Inc. (NASDAQ:FB) said that it planned on expanding its operations in the respective country by getting the approval and support from Chinese authorities. The company also planned on improving its local reach, and it opened an office in china for that purpose.

Facebook, via an email, announced in May that the Chinese traders, developers and exporters have a great chance to promote their products with the help of Facebook, by reaching to the customers located in other countries.

The company further said that its sales team supported the Chinese business located in Hong Kong, and the businesses of that region grew with a rapid pace. Facebook Inc. (NASDAQ:FB) itself is also looking for ways to explore the local market of the country and is planning on opening up a sales office in China.

Sheryle Sanberg, the chief operating officer of the company, met several Chinese higher officials recently. The COO said that the aim of the company is to increase its reach worldwide and enable everyone to connect and share. She further commented that Facebook Inc. (NASDAQ:FB) has been keeping an eye on the Chinese market for several years now and is quite interested to start its business in the respective region.

According to the reports of World Bank, the internet population in China is far greater than that of Canada and United States. The numbers were recorded to be around 698 million in 2013, and the estimates are that it will surpass 1 billion by the end of 2020.

Facebook was operating in China until 2009 when the Xinjiang protests caused the website to stop its functions in that country. Since then, the Chinese social platforms of Weibo Wb and Tencent WeChat are operating in China, with users spending approximately 212 minutes per month on the respective sites. Facebook Inc. (NASDAQ:FB) can increase its revenues significantly; all it needs to do is tap on the opportunity.