Walmart Analyst: Fintech Platform PhonePe Could Be Worth Almost As Much As Flipkart

Retail giant Walmart Inc WMT's $16-billion acquisition of India's Flipkart included a majority stake in a payments app, PhonePe, thatcould be worth more than $14 billion in the medium-term, according to KeyBanc Capital Markets.

The Analyst

Edward Yruma maintained an Overweight rating on Walmart with a price target lifted from $120 to $125.

The Thesis

Flipkart acquired PhonePe in 2015 and Walmart took a 77% stake as part of the acquisition, Yruma said in a Monday note. (See his track record here.)

PhonePe stands out in the growing payment field, as it is not looking to build an e-commerce business within a payment platform, the analyst said.

This makes PhonePe a compelling service for physical retailers to use at an early stage in the fintech expansion in India, he said.

Digital payments at Indian physical retail stores are modeled to grow at a compounded annual growth rate of more than 20% through 2023, from $65 billion to $135 billion, Yruma said. Peer-to-peer payments add another $150 billion to PhonePe's total addressable market, he said.

Walmart should be able to leverage its expertise in managing a large offline business to the Indian market, the analyst said.

If the digital payment space in India grows as expected, Bentonville's stake in PhonePe could be worth $14 billion in the medium-term, which would be close to what it paid for Flipkart, according to KeyBanc.