Sea (SE) GMV Performance Key To Earnings Beat Profitability

$Sea Ltd(SE)$ is scheduled to report second-quarter 2024 results on 13 Aug 2024 before market open. It is expected to show a rise in quarterly revenue when it reports results on 13 August for the period ending 30 June 2024.

The consensus estimate for second-quarter revenues is pegged at $3.73 billion, suggesting growth of 24% year over year.

The estimate for SE earnings per share is 31 cents per share which is more than 50% lower than same period last year.

Sea (SE) Consumer Growth

ASEAN is the third-largest market in the world, by population size, after China and India. It is a huge market as measured by population size. Despite the large population, the average level of economic development is low.

Indonesia, Thailand, Malaysia and other countries where Shopee is present boast growing populations, increasing disposable incomes, as well as low e-commerce penetration. The E-commerce market has been growing rapidly in the region and should continue advancing due to favourable demographics.

Shopee is likely to maintain a strong position in these growing markets, as it generates the leading traffic and attracts the largest number of merchants.

Due to continuing investment to accommodate business growth, Shopee is not generating profits yet. For this reason, Sea Limited trades half the revenue multiples of more mature and profitable retail platform operators such as $PDD Holdings Inc(PDD)$ and MercadoLibre (MELI)

The continuing revenue growth of Shopee will help the platform to scale and achieve higher profit margins. Sea Limited is likely to deliver attractive returns for long-term holders. However, the short-term growth rates can be challenged by increasing competition.

Competition From Tiktok Not To Be Ignored

The total gross merchandise value (GMV) of Southeast Asia’s eight leading e-commerce platforms rose 15% YoY to $114.6 billion in 2023.

TikTok Ship almost quadrupled its annual GMV to $16.3 billion. By surpassing Tokopedia, TikTok Shop emerged as the second-largest e-commerce platform in Southeast Asia.

TikTok completed its deal to take control of GoTo Group’s Tokopedia, Indonesia’s largest e-commerce platform, in early 2024.

Shoppe, being the largest player in Southeast Asia continues to grow its DMV and at the same time maintain its market share at about 48%.

Temu, Pinduoduo’s global arm that shook up the ecommerce landscape in the US, has also entered the Southeast Asia in 2023. However, the platform has been focusing on North America, Europe and other more affluent countries. It might turn more attention to the region after ROI in other markets declines.

Sea (SE) Price Target Forecast

Based on 20 Wall Street analysts offering 12 month price targets for Sea in the last 3 months. The average price target is $80.65 with a high forecast of $95.00 and a low forecast of $60.00. The average price target represents a 24.34% change from the last price of $64.86.

If we were to look at the consumer spending due to the economic uncertainty and geopolitical tensions over the last few months, China consumer have turned cautious in their spending, whereas in SouthEast Asia, the consumer spending is growing because of the general increase in earning not only in Singapore but in other part of Asean.

This is because of the growth of economic activities here in Asean as more inflow of investments came to this region, so this could help in SE business not only in ecommerce, but also the SEA money, as there are businesses who would need to move funds.

Hence, I am expecting SE to be trading close to the $70 dollar price target.

Sea (SE) Year-To-Date 60% Return Impressive

There are still growth potential in SE for the longer term, but for short term, they are facing competition from bigger ecommerce player like PDD and Tiktok in the region.

SE focus is now in Asean, and with the GoTo strong in Indonesia, we could be seeing some challenges to SE business in indonesia. But the SEA money should do well in terms of stability from Singapore as the HQ.

I will be expecting another 5% growth in its stock price.

Technical (MACD and KDJ)

Both MACD and KDJ is showing potential upside, and MACD is providing a signal that this current price might be considered for a BUY target.

With the KDj showing a potential upside movement with J value trending upwards, we could seeing some strong buying in SE today (12 Aug) before its earnings result tomorrow.

I will be focusing on its GMV, because an improvement in the GMV could help to push the stock price higher.

Summary

I will be focusing on SE GMV results as this should give us an idea whether they can continue to maintain their 48% market share in Asean on the ecommerce side. As for the financial product side, SE might be doing well because there have been cross border business activities which require payments seamlessly across.

I will be looking at the price action as I am expecting some strong buying ahead of its earnings result.

Appreciate if you could share your thoughts in the comment section whether you think SE could make a recovery back from its previous earnings with better GMV.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.