Walmart Inc (NYSE: WMT) stock hasn’t reacted positively to the company’s recently announced $16 billion Flipkart investment. Shareholders are concerned that Flipkart’s losses could be an albatross for Walmart, but analysts say India’s e-commerce market is a rare opportunity.
According to Morgan Stanley analyst Simeon Gutman, the total addressable market for online sales in India will grow to roughly $200 billion by 2026.
“India represents a significant long-term opportunity,” Gutman says.
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Today, the U.S. and China represent a combined share of approximately 80 percent of the global e-commerce market. However, Gutman says India is coming on strong.
“India represents just 1 percent today, but the region is undergoing a structural e-commerce shift,” Gutman says.
Morgan Stanley predicts the total number of internet users in India will more than double over the next decade from 432 million in 2017 to 915 million by 2027. Internet usage is highly correlated to online sales. The firm is expecting an explosion in the number of online shoppers in India from 60 million to 475 million in the next 10 years.
With its investment in Flipkart, Walmart has immediately established itself as a major presence in India. Flipkart has 100 million registered users, logs 10 million daily page visits and makes 8 million shipments per month. In the past year, Flipkart’s revenue grew 50 percent to $4.6 billion.
Despite the opportunity for growth in India, Walmart stock is down more than 1 percent since it announced the Fipkart investment. A major part of that lackluster response from investors is Flipkart will eat into Walmart’s earnings for the foreseeable future. Morgan Stanley estimates Flipkart will cost Walmart roughly 60 cents per share in EPS in fiscal 2020.
Morningstar analyst John Brick says Walmart investors are getting a lot of benefits in return, however.
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“Beyond building out its presence in India, we believe Walmart should be able to leverage Flipkart’s talent and technology to aid in the development of its Jet.com platform,” Brick says. “We think the addition of Flipkart will enable Walmart to tap another 1.3 billion customers in an attractive market that presently represents less than 1 percent of sales for Walmart today but can become 10 percent of sales by fiscal 2026.”
Morgan Stanley has an “equal-weight” rating and $99 price target for Walmart. Morningstar has a $91 fair value estimate for WMT stock.
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Walmart Inc (WMT) Analysts Don’t Mind Flipkart Losses originally appeared on usnews.com
