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UPDATE 3-Wal-Mart sees 40 pct online sales growth next year, shares jump

* Expects net sales to rise at least 3 pct in FY'19

Faster online growth should pressure profits-UBS analysts

* To double locations for shipping online grocery orders (Adds details from investor meeting; updates shares)

By Sruthi Ramakrishnan and Sayantani Ghosh

Oct 10 (Reuters) - Wal-Mart Stores Inc on Tuesday forecast that its U.S. online sales would soar about 40 percent in the fiscal year ending January 2019, sending its stock up 4.7 percent to the highest in more than two years.

The company also forecast overall net sales to rise by at least 3 percent in the same period and said it would buy back $20 billion of its shares over the next two years.

The retailing behemoth reiterated its focus on its e-commerce business at its annual investor meeting in Bentonville, Arkansas. It has started offering free two-day shipping and plans to roughly double the locations for shipping online grocery orders and slash the number of physical stores.

Wal-Mart, locked in a battle for market share with ecommerce group Amazon.com Inc, has been doubling down on its online business and leveraging its 4,700-plus stores trying to create a more hassle-free experience for online shoppers.

"We are going to lean into places like technology, e-commerce, international stores ... we feel like we are going in the right direction with that," said Wal-Mart Chief Financial Officer Brett Biggs.

The company did not break out U.S. e-commerce sales last year, but reported growth of about 62 percent for the first half of this year.

With a steady rise in people buying online, Wal-Mart's e-commerce sales growth has been outstripping brick-and-mortar.

Wal-Mart plans to open fewer than 15 supercenters and less than 10 neighborhood markets in the United States in the fiscal year ending January 2019. That's half the stores it intends to open in fiscal 2018.

Last year, Wal-Mart opened 230 supercenters and neighborhood markets.

"Digital has been a recent highlight for WMT and it expects this momentum to carry into FY '19," UBS analysts said in a research note.

"Faster growth in (e-commerce) should lead to earnings pressure though, as this operation is likely still several years away from profitability," the analysts said.

In August, the company warned that current-quarter profit could miss Wall Street estimates as margins are being hurt by price-cutting and heavy spending on e-commerce.

Total revenue increased 2.1 percent to $123.4 billion in the latest quarter. Wal-Mart did not break out total online sales.

Like other retailers, Wal-Mart has been investing aggressively. The company said on Tuesday it expects capital expenditures to be about $11 billion for fiscal years 2018 and 2019.

It started offering free two-day shipping and discounts for picking up online purchases at stores, and has acquired several start-ups, including Jet.com for $3.3 billion last year.

Grocery competition has increased since Amazon bought Whole Foods and started to cut prices at the upmarket grocer in August.

Wal-Mart forecast fiscal 2019 profit would increase about 5 percent over the expected adjusted earnings of $4.30 to $4.40 per share for the year ending January 2018.

The new buyback replaces the existing $20 billion program announced in October 2015. In the seven quarters since, Wal-Mart had bought back $15.10 billion worth of shares.

It was not immediately clear how much of the remaining $4.9 billion under the old plan it had used in the current quarter.

Wal-Mart stock rose $3.82 to $84.35, the highest since February 2015. (Reporting by Sruthi Ramakrishnan in Bengaluru and Sayantani Ghosh in New York; Additional reporting by Dan Burns in New York; Editing by Saumyadeb Chakrabarty and Jeffrey Benkoe)