Walmart: Here's why UBS is bullish on the stock

Michael, welcome. Why don't you lay out the thesis here and why you like what Wal-Mart seems to be doing in third-party marketplace. Thanks for having me, Tyler. Our thesis is that Wal-Mart is in the early stages of building this ecosystem that is going to drive considerable sales and earnings growth for the next several years. A key piece of that is going to be its third-party marketplace that, as of last year, did about $70 billion of GMV collectively through its domestic and international properties. We think that over the next few years, that can grow to $150 billion. And as it grows the third-party marketplace, that drives other elements of very high-margin revenue streams like advertising, logistics, data monetization, and others. And this is going to be a stock that investors are going to want to own as we move through this very attractive growth cycle. So it becomes a kind of virtuous cycle, not only creating this revenue river, but also having knock-on effects with advertising and other things. How much does, as a percent, what is Wal-Mart's margin when they sell a third-party item for, let's say, $25? What do they collect in revenue from that? So we think that the profitability right now has improved, but it's still probably losing some money, probably in the mid-single-digit range, so call it minus 5%. But this is a business about scale. And as you get more third-party sellers, you get more assortment, you get more scale. And that should lead to significant improvement in the profitability of this one segment, such that that minus 5% this year can go to 15% positive on the margin over the next few years. If that's the case, that can add 8% to the entire profitability of the enterprise. We think that this will be significant, and it's just one factor of many that can drive target shares higher over time. Michael, I have not used the Wal-Mart app or Wal-Mart Plus or any of those platforms lately. Are there a lot of third-party items on the platform today, and at what point are you expecting a lot more third-party items to be available? When should I download the app? You should download the app. They've made a lot of changes to it over the years. It's very easy to use. There's not a lot of friction in the process. It's a good experience. Right now, there's about 500 million items available through walmart.com. That's growing in part because it's adding more third-party sellers. The best we can tell is it's got between 100,000 and 150,000 third-party sellers through walmart.com. To put that in comparison, Amazon has 2 million third-party sellers. Wal-Mart is just scratching the surface. Wal-Mart is a viable alternative because a lot of these third-party sellers don't want to put all of their eggs in one basket. They want to diversify their business, and they want to tap into the very rapid growth that Wal-Mart provides them. It's got a lot of natural traffic, and you can sell more products to the very significant traffic that is coming to Wal-Mart's website and to its app. Thanks for watching.