On Wednesday, BofA Securities updated its outlook on shares of Sea Ltd (NYSE:SE), increasing the price target to $84 from $77, while keeping a Buy rating on the stock. The adjustment follows Sea's financial performance, with revenues meeting estimates and net income surpassing expectations due to lower-than-anticipated sales and marketing costs.
The e-commerce platform Shopee, operated by Sea Ltd, reported adjusted EBITDA losses of $9 million for the second quarter, aligning with BofA Securities' projection of a $5.5 million loss. Management at Sea Ltd has revised its e-commerce guidance, anticipating Shopee to reach adjusted EBITDA breakeven in the third quarter and forecasting a mid-20% range growth in Gross Merchandise Value (GMV) for the fiscal year 2024.
During the earnings call, Sea Ltd's management expressed a positive outlook, emphasizing plans to expand while continuing strategic investments to sustain its competitive edge. Shopee's GMV for the second quarter registered at $23.3 billion, a 29% increase year-over-year, and was consistent with BofA Securities' estimate of $23.1 billion. Moreover, Shopee's take rate improved to 12.1%.
The company's adjusted EBITDA for Asian markets showed a profit of $3.8 million, while losses for other markets amounted to $13 million. In Brazil, Shopee achieved a positive contribution margin per order of 9 cents. However, gaming revenue declined by 5% quarter-over-quarter and fell 6% short of BofA Securities' expectations, with average revenue per user (ARPU) also below estimates by 4%.
BofA Securities revised its FY24/25E EPS projections for Sea Ltd and increased target multiples for the gaming segment to 6.5 times FY25E EV/EBITDA, up from 5.5 times, and for Shopee to 0.28 times FY25E EV/GMV, up from 0.25 times. These changes reflect the improved momentum in Sea's businesses. The firm's sum-of-the-parts based price objective has been adjusted accordingly, with a continued recommendation to buy Sea shares due to the favorable risk-reward profile.
In other recent news, Sea Limited (NYSE:SE) reported strong growth across all segments in its second quarter of 2024. The company's GAAP revenue increased by 23% year-over-year to $3.8 billion, while adjusted EBITDA reached $448 million. Furthermore, Shopee, Sea Limited's e-commerce platform, is expected to become adjusted EBITDA positive from the third quarter and the company has revised its 2024 full-year GMV growth rate guidance to the mid-20s percentage range.
Sea Limited's digital entertainment segment, Garena's Free Fire, maintained strong growth with over 100 million daily active users in Q2 2024. However, the company reported a decrease in net income for Q2 2024 to $80 million, down from $331 million in Q2 2023.
These are the recent developments for Sea Limited, showcasing robust growth and improved profitability. It's also worth noting that SeaMoney's loan book and profit grew by 40% year-over-year, with non-performing loans remaining steady. The company continues to demonstrate solid performance and strategic growth across its diverse portfolio.
InvestingPro Insights
Recent updates from InvestingPro provide a deeper financial perspective on Sea Ltd (NYSE:SE), complementing the analysis by BofA Securities. Investors may find it noteworthy that Sea Ltd holds more cash than debt on its balance sheet, which could be a sign of financial stability. Moreover, analysts have revised their earnings upwards for the upcoming period, reflecting a positive sentiment regarding the company's future performance.
From a valuation standpoint, Sea Ltd is trading at a high earnings multiple, with a P/E ratio of 1175.91, which adjusts to 364.28 for the last twelve months as of Q1 2024. This suggests a premium valuation that investors are willing to pay for the company's growth potential. The company's revenue growth for the last twelve months stands at 9.26%, with a significant quarterly increase of 22.8% in Q1 2024, underlining the company's expanding business.
InvestingPro also highlights that the stock has experienced a considerable return over the last week, with a price total return of 23.25%. This performance may capture the market's reaction to recent developments and the company's financial results. For those interested in a more thorough analysis, InvestingPro offers additional tips on Sea Ltd, which can be found at https://www.investing.com/pro/SE.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.