On Wednesday, Citi analyst Alicia Yap increased the price target for Sea Ltd. (NYNYSE:SE: SE) shares to $113 from the previous $90, while reaffirming a Buy rating on the stock. The adjustment comes ahead of the company's expected third-quarter 2024 financial report, which is scheduled for release in mid-November.
Sea Ltd., which had previously upgraded its Shopee guidance during the second quarter of 2024, anticipates a mid-20% year-over-year growth in Gross Merchandise Value (GMV) and aims to achieve an adjusted EBITDA-positive status starting in the third quarter of 2024. The analyst projects that Shopee will reach an EBITDA of $21 million or 0.09% of GMV, driven by a 21.8% and 34% year-over-year growth in GMV and revenues, respectively. This performance is expected to result in a monetization rate of 12.2%.
The report also suggests that Sea's digital entertainment bookings are set to increase by 20% year-over-year, supported by a higher-than-anticipated EBITDA, which is attributed to the continued benefits from anniversary promotional activities. The overall outlook for the third quarter of 2024 is positive, with potential slight increases in e-commerce and digital financial services (DFS) revenues, as well as in gaming and DFS EBITDA.
Looking ahead to the fourth quarter of 2024, the analyst anticipates Sea Ltd. to maintain its growth trajectory, bolstered by strong seasonal trends and a relatively stable competitive landscape. Following the adjustments to the estimates, Citi has raised its target price for Sea Ltd., endorsing the stock as a core holding for portfolios focused on the Association of Southeast Asian Nations (ASEAN) region.
In other recent news, Sea Ltd has had several significant developments. Jefferies raised the stock price target for Sea Ltd from $92.00 to $114.00, maintaining a Buy rating. The firm anticipates solid Gross Merchandise Volume growth for Sea Ltd's e-commerce platform, Shopee, and strong momentum for the company's digital financial services. Additionally, BofA Securities raised the price target for Sea Ltd from $84 to $96, highlighting Shopee's increasing market share and expansion of partnerships.
Sea Ltd's collaboration with YouTube was also noted as a strategic move to enhance Shopee's reach within the livestreaming e-commerce space. The partnership is expected to provide a competitive edge against rivals and address challenges posed by competitors in the region.
In financial performance, Sea Ltd reported a 23% year-over-year increase in total GAAP revenue to $3.8 billion in the second quarter. The company's e-commerce platform, Shopee, showed a 29% year-over-year increase in Gross Merchandise Value, reaching $23.3 billion.
JPMorgan reaffirmed its Overweight rating on Sea Ltd's stock, underscoring the growing number of gamers and potential for higher monetization.
InvestingPro Insights
Sea Ltd.'s recent performance aligns with several key metrics and insights from InvestingPro. The company's stock has shown remarkable strength, with a 107.39% price total return over the past year and a 139.09% return year-to-date. This robust performance is reflected in an InvestingPro Tip noting the stock's "high return over the last year" and its trading "near 52-week high."
The company's revenue growth of 13.53% in the last twelve months, coupled with a 22.97% quarterly growth, supports the analyst's positive outlook on Sea's e-commerce and digital entertainment segments. However, it's worth noting that Sea is currently "not profitable over the last twelve months," with an operating income margin of -0.21%. This aligns with the company's goal to achieve adjusted EBITDA-positive status in Q3 2024, as mentioned in the article.
InvestingPro offers 15 additional tips for Sea Ltd., providing investors with a comprehensive view of the company's financial health and market position. These insights can be particularly valuable for those looking to make informed decisions about their ASEAN-focused portfolios, as suggested by the Citi analyst.
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