Walmart's reasoning is that it doesn't feel as though it has enough traction in its online business and hopes that this transaction would them a boost, Quick reported.
Walmart must win against its biggest threat, Amazon.com. If Jet.com will make Walmart more competitive against Amazon.com (AMZN) than it is worth the hefty price tag, JRKWWE CEO Jan Rogers Kniffen told CNBC.
Jet however, is not making any money and doesn't show signs of making money. The company burns through more than $20 million a month in advertising alone, Kniffen said.
Jet.com's original plan was to charge a membership fee like Sam's Club, but price it at $49 instead of $99.
The company is selling items for 18%-22% cheaper than Amazon, which makes the customers happy but not the shareholders. Walmart will change the pricing architecture when it takes over Jet, Kniffen added.
"I think if they pay 3 billion bucks for it, that's probably more than its worth in the outside world. But it's certainly not more than it's worth to Walmart if it works," he said.
Shares of Walmart are trading higher today.
Separately, TheStreet Ratings team rates this stock as a "buy" with a score of B. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, increase in stock price during the past year and notable return on equity. TheStreet Ratings team feels its strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
You can view the full analysis from the report here: WMT