Sea Limited: A Mouthwatering Prospect Ahead Of Q2 Earnings

Seekingalpha2023-08-14

SummarySea Limited will report its second-quarter earnings on August 15, with investors' sentiments much more pessimistic than its previous first-quarter release.I assessed that the recent pessimism ...

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cxyhb
2023-08-15
cxyhb
Very bad advice, did you yourself buy???

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However, investors' sentiments heading into i","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"SE":"Sea Ltd"},"translate_title":"Sea Limited：Q2收益前令人垂涎的前景","themeId":"","isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"SE":1},"content_text":"SummarySea Limited will report its second-quarter earnings on August 15, with investors' sentiments much more pessimistic than its previous first-quarter release.I assessed that the recent pessimism aligns constructively for SE heading into its pivotal Q2 release, as investors remain worried about its profitability push.Analysts' estimates suggest that Sea Limited is expected to experience significant operating leverage gains over the next two years. However, its valuation suggests investors have not priced it in.While TikTok's market share gains must be observed carefully, Sea Limited's market leadership and significant scale in Southeast Asia position it well for a tough battle.I make the case for why buyers have been quietly accumulating ahead of SE's Q2 earnings release. High-conviction investors should join me in adding SE before it potentially surges subsequently.Singapore-headquartered leading internet company Sea Limited (NYSE:SE) is slated to report its second-quarter or FQ2 earnings release on August 15. However, investors' sentiments heading into its upcoming report card are assessed to be much less optimistic than SE's pre-Q1 sentiments (which I cautioned previously).Accordingly, SE has continued to hover close to the $58 support level, well below its May 2023 high of $88 (down nearly 35%). As such, I assessed the pessimism augurs well for buyers looking to pounce on a potentially more optimistic outlook from management, despite the persistence of near-term macroeconomic headwinds in Southeast Asia.Analysts' estimates for Sea Limited suggest it is primed to continue gaining operating leverage through the rest of the year, indicating a robust path toward sustainable profitability.Accordingly, Sea Limited is expected to report revenue of $3.25B in FQ2, up 10.4% YoY. As such, investors should expect Sea Limited's Q1 revenue growth of 4.9% to mark the bottom in its normalization phase. With that in mind, unless management emerges with significantly worse guidance than anticipated, I assess that the worst in SE is likely priced in.Full-year adjusted EBITDA estimates for Sea Limited are expected to reach $2.02B for FY23, based on a margin of about 15%. Therefore, it's a critical milestone for Sea Limited to deliver, demonstrating to investors that it can subscribe to sustainable growth. Based on the forecast period through FY25, Sea Limited is expected to deliver an adjusted EBITDA CAGR of 36.6% from FY23-25. Therefore, I assessed that SE should remain priced at a premium as a growth stock, as seen with its \"B+\" growth grade assigned by Seeking Alpha Quant.Much will depend on Sea Limited's market leadership position in Southeast Asia, even as TikTok (BDNCE) and Lazada (BABA) ramp up pressure. Alibaba's restructuring efforts could provide more firepower and focus for Lazada to recover its leadership against Shopee (Sea Limited's e-commerce unit). With the Chinese economy still suffering from a slow recovery from its post-COVID reopening, Alibaba's recent significant investment in Lazada shouldn't come as a surprise.Moreover, TikTok is attempting to take on the market leaders with renewed vigor under the close watch of CEO Show Zi Chew. The Singaporean CEO has shaken up his e-commerce executive ranks as the ByteDance-owned company ventures further into its e-commerce drive. TikTok was reported to have ambitions to grow its gross merchandise value, or GMV, to $20B. In Southeast Asia, its GMV \"quadrupled to $4.4 billion in 2022 compared to the previous year.\"However, the Indonesian government recently introduced legislation prohibiting sales of imported goods \"under $100 on e-commerce sites and social media platforms to protect local businesses.\" Given the company's increasing e-commerce gains, the ban could be aimed at TikTok. Concerns were raised about \"TikTok's e-commerce push potentially flooding the market with Chinese products.\"I didn't glean significant selling sentiments that threatened SE's critical support level of $58. As such, I assessed that SE buyers likely weren't unduly with the intended target of the recent regulatory changes in Indonesia (a key market for Shopee).SE price chart (weekly) (TradingView)As seen above, SE has robustly held the $58 support zone since February 2023. It indicates a higher low market structure as SE bottomed out decisively in November 2022.While May's significant selloff spooked investors' sentiments, the critical observation of buyers resolutely defending the $58 level is substantial. It suggests that SE could still recover its nascent medium-term uptrend recovery that is in danger of turning back downward.With SE priced at an FY25 EBITDA multiple of 8.2x, the market seems relatively pessimistic about Sea Limited's ability to execute its profitable growth strategies. In other words, the robust buying sentiments seen at the $58 level are assessed as an accumulation zone rather than a distribution. SE is still priced attractively relative to its potentially significant gains in operating leverage over the next two years.Therefore, I assessed that the setup for SE heading into its upcoming earnings release is constructive. Investors should capitalize on its recent pessimism to add more exposure before it potentially surges higher on a better-than-expected release.Rating: Maintain Speculative Buy. Please note that a Buy rating is equivalent to a Bullish or Market Outperform rating.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":209170058526776,"gmtCreate":1692103726878,"gmtModify":1692103734642,"author":{"id":"4090664830008420","authorId":"4090664830008420","authorIdStr":"4090664830008420","name":"cxyhb","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"hat":"https://static.tigerbbs.com/f84d87792f02cf78e80ee34979fd31e5","crmLevel":8,"crmLevelSwitch":0,"idStr":"4090664830008420"},"htmlText":"Very bad advice, did you yourself buy???","listText":"Very bad advice, did you yourself buy???","text":"Very bad advice, did you yourself buy???","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/209170058526776","repostId":2359073891,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":15,"commentSize":1,"repostSize":1,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.28.1","shortVersion":"4.28.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2359073891"}