Bernstein on Walmart (WMT): 'Could Flipkart and PhonePe unlock additional upside?'

Bernstein SocGen Group analyst Zhihan Ma reiterated an Outperform rating and $106.00 price target on Walmart (NYSE: WMT).

The analyst commented: "Could Flipkart and PhonePe unlock additional upside? Walmart has made inroads internationally in recent decades, with international now representing 18% of sales. In this note, we focus on India, where WMT’s Flipkart and PhonePe businesses have taken off and are positioned to go public in the coming years. These transactions could unlock upside for WMT that’s not priced in today.

WMT owns 84-85% stakes in Flipkart and PhonePe. Flipkart is one of India’s largest ecommerce platforms with an estimated GMV of USD $27B. PhonePe is India’s leading app for UPI (Unified Payments Interface) payment transactions with ~50% market share. PhonePe has turned profitable while the Flipkart Marketplace business remains unprofitable.

If we assume that WMT sells 30% of its stakes following PhonePe’s and Flipkart’s IPOs (similar to Walmex’s public float) and uses the cash windfall to pay down debt or repurchase shares, these transactions could generate a one-time EPS benefit of 9-11c and lower WMT’s P/E multiple by one turn from ~34x to 33x. Given Flipkart’s complex ownership structure and sensitivities around listing such a large, foreign-owned entity, we expect PhonePe to IPO first, followed by Flipkart."

For an analyst ratings summary and ratings history on Walmart click here. For more ratings news on Walmart click here.

Shares of Walmart closed at $91.30 yesterday.

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