U.S. Markets closed

Call of the week: Facebook likely entering China next year

Facebook (FB) could finally have access to the more than 700 million internet users in China, and that’s Yahoo Finance’s call of the week.

Mizuho analyst James Lee wrote in a note to shareholders this week, “During our recent China trip, our meetings with various industry contacts indicated that FB could have a realistic opportunity for entering China next year.”’

Here’s why it’s such a big deal. Access to China’s rapidly growing internet population could greatly boost Facebook’s business. According to a report from The China Internet Network Information Center, the country’s internet population has soared about 433% over the past 10 years, with more than a half of its population online.

So why does Lee think Facebook could gain access to China as early as 2018? Chinese President Xi Jinping is entering his second term in office in November, and according to Lee, “media scrutiny and sensitivity are much less during an administration’s second term.” He also highlights the recent approval of LinkedIn and Airbnb, Facebook’s decision to hire a Beijing-based government relations executive, and says its current approach of helping Chinese advertisers sell ads overseas “appears to be aligned with Chinese government’s policy to globalize local companies.”

Just think how much bigger Facebook could get if it has access to China’s 1.4 billion population. The company already has a market capitalization of $494 billion, making it the fourth most valuable company behind only Apple (AAPL), Alphabet (GOOGL) and Microsoft (MSFT).

If Lee is right and Facebook gets approved to do business in China, he thinks the company “will likely operate an Instagram-like app, for photo and video sharing or VR-gaming platform through Oculus.”

Shares of Facebook were last trading down 0.9% at $169.61 per share on Friday.