Internet stocks look expensive, but Nykaa and Lenskart remain long-term bets: Mayuresh Joshi

India’s new-age internet stocks may no longer qualify as bargain buys, but the sector’s long-term growth case remains firmly intact, according to Mayuresh Joshi, Head of Equity Research at William O’Neil India. Even as valuations across the space turn expensive after a sharp rally, Joshi believes select names such as Fsn E-Commerce Ventures Ltd (Nykaa) and Lenskart Solutions Ltd still merit a place in portfolios because of their earnings profile, scale potential and expanding digital footprint.

Rich valuations, but a structural story

Joshi struck a note of caution on near-term pricing, saying the broader internet pack is “richly valued as we speak.” That assessment comes amid strong moves in counters such as Paytm, Lenskart, Nykaa and PB Fintech, reflecting renewed investor appetite for platform-led consumer businesses.

Yet his broader message was not bearish. Instead, he argued that the sector is likely to command a “lion’s share over the next decade,” with a handful of companies becoming significantly larger as consumption patterns evolve and India’s demographic shifts deepen the market for digital-first brands.

Why Nykaa and Lenskart stand out

Within that universe, Joshi identified Nykaa and Lenskart as continuing portfolio holdings. “Lenskart and Nykaa is something that we continue holding in our portfolio,” he said, while clarifying that these positions were accumulated “at way lower levels.”

The rationale, he suggested, lies in the quality of recent numbers and the scale of the opportunity ahead. He pointed to the “kind of numbers that they have posted,” alongside the “addressable market size, the TAM as we call it,” as key reasons these businesses remain compelling despite elevated valuations.

Digital footprint drives earnings leverage

A central part of the investment case is operating leverage. Joshi argued that as these companies deepen their digital footprint, operating costs remain relatively contained, allowing earnings growth to accelerate faster than revenue over time.

That is a crucial distinction in a market that has become more selective on profitability after years of rewarding growth at any cost. For investors, the takeaway is that scale alone is no longer enough; the market is increasingly backing internet businesses that can convert reach into margins.

Targets signal selective optimism

Joshi’s stance captures the balancing act now defining the internet theme: expensive on conventional valuation metrics, but still attractive for investors willing to back category leaders with long runways. His stated targets stand at 710 for Lenskart and around 350 for Nykaa.

The broader backdrop also supports that selective approach. In a market where Joshi has repeatedly emphasised earnings over market-cap labels, internet names that combine growth, profitability potential and large total addressable markets appear to be earning a premium — and, in some cases, justifying it.