Smartphone Adoption And Digital Payments Will Benefit Emerging Markets

Key Takeaways

• Accelerated AI adoption and efficient ecosystem integration are expected to drive superior margin expansion, cash flow generation, and operational outperformance.
  
• Strategic investments in emerging markets and digital financial services could unlock significant new revenue streams and position Prosus for sustained, robust growth.
  
• Heavy reliance on Tencent and uncertain profitability across non-Tencent platforms expose Prosus to regulatory, competitive, and market risks that threaten margins and future growth.

Catalysts

Engages in the e-commerce and internet businesses in Asia, Europe, Latin America, North America, and internationally.

• Analysts broadly agree that Prosus will benefit from improved efficiencies and growing net margins due to AI implementation and ecosystem synergy, but given Prosus's recently demonstrated speed of innovation and company-wide commitment to operational excellence, the scale and pace of margin expansion could substantially exceed expectations, rapidly boosting both net earnings and free cash flow.
  
• While the analyst consensus highlights large upcoming IPOs (such as Swiggy) and potential for liquidity events, these public listings alongside a disciplined but aggressive redeployment of the $11 billion cash position into high-growth adjacencies could unlock far greater value realization and accelerate group-level revenue and earnings growth far beyond near-term projections.
  
• The company's strong execution in integrating and scaling cross-segment ecosystem "flywheels," particularly in Latin America and India, positions it to replicate the outsized multi-business success seen with dominant regional peers-implying the potential to double or triple addressable revenue and materially increase operating leverage over the next several years.
  
• Prosus's focus on fintech, payments, and digital credit for underbanked populations, combined with surging internet and smartphone adoption across emerging markets, points to the possibility of building multi-billion dollar new revenue streams within digital financial services-materially lifting topline growth and raising long-run profitability.
  
• The company's cultural transformation into an agile, entrepreneurship-driven operator, accelerated integration of acquired businesses, and relentless pursuit of "playing to win" could sustain 15 to 20 percent compounded revenue growth for several years, driving upward earnings revisions and a structural re-rating of the stock.

Prosus Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Prosus compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Prosus's revenue will grow by 22.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 202.5% today to 99.1% in 3 years time.
• The bullish analysts expect earnings to reach $11.3 billion (and earnings per share of $7.7) by about July 2028, down from $12.5 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 16.0x on those 2028 earnings, up from 10.8x today. This future PE is greater than the current PE for the NL Multiline Retail industry at 10.8x.
• Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.7%, as per the Simply Wall St company report.

Prosus Future Earnings Per Share Growth

Risks

• Prosus faces long-term concentration risk because a significant portion of its cash flow and value remains tied to Tencent, making it vulnerable to adverse regulatory changes, taxation, or underperformance at Tencent, which could materially impact Prosus's consolidated earnings and net asset value per share.
  
• Growing regulatory scrutiny, especially in Europe and China, as well as more aggressive antitrust enforcement and complex cross-border investment restrictions, could hinder Prosus's ability to monetize or expand its portfolio, potentially increasing compliance costs and reducing future revenue growth and net margins.
  
• The path to profitability for Prosus's e-commerce, food delivery, and fintech platforms outside of Tencent remains uncertain, as highlighted by their continued need for reinvestment in competitive markets like Latin America and India, raising the risk of persistent operating losses and depressed group profit margins into the foreseeable future.
  
• Intensifying competition in food delivery and online classifieds, with global entrants such as Meituan aggressively targeting key markets, could cause margin compression and slow Prosus's market share gains, hindering revenue growth and putting pressure on overall group earnings.
  
• Tighter global liquidity and rising interest rates may continue to suppress private tech valuations and make realizations of portfolio exits or IPOs less lucrative, negatively impacting Prosus's net asset value and potentially reducing future free cash flow available for reinvestment or shareholder distributions.

Valuation

• The assumed bullish price target for Prosus is €70.72, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Prosus's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €70.72, and the most bearish reporting a price target of just €37.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $11.4 billion, earnings will come to $11.3 billion, and it would be trading on a PE ratio of 16.0x, assuming you use a discount rate of 6.7%.
  
• Given the current share price of €51.53, the bullish analyst price target of €70.72 is 27.1% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.