Sea Limited: A Bottom For Video Games Is Near, But Why I'm Out

10
2
Favorite

Sea Limited: A Bottom For Video Games Is Near, But Why I'm Out

Seekingalpha03-05

SummarySea Limited reported solid Q4 results with aggressive e-commerce growth boosting top-line numbers but diluting overall profitability.Management expects another profitable year in 2024, calming ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Report

Comment（2）

romanc9
·03-05
See some idiotic analyst or writer, after clearing their position and make profit, downgraded it and then when down they pick up again and upgrade and the processes go all over again..
Reply
1
Report
Daytraderz
·03-05
U sell means its going go up
Reply
1
Report

Most Discussed

7x24

All

Terms and Conditions·Privacy Policy

Company: TTMF Limited. Tech supported by Xiangshang Yixin.

Email：uservice@ttm.financial

{"i18n":{"language":"en_US"},"data":{"share":"https://ttm.financial/m/news/1163413007?lang=en_US&edition=fundamental","thumbnail":"","is_english":true,"pubTime":"2024-03-05 19:42","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"1163413007","market":"us","top_or_hot":-1,"title":"Sea Limited: A Bottom For Video Games Is Near, But Why I'm Out","media":"Seekingalpha","content":"<div>\n<p>SummarySea Limited reported solid Q4 results with aggressive e-commerce growth boosting top-line numbers but diluting overall profitability.Management expects another profitable year in 2024, calming ...</p>\n\n<a href=\"https://seekingalpha.com/article/4675730-sea-limited-bottom-for-video-games-near-why-i-sold-stock\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Sea Limited: A Bottom For Video Games Is Near, But Why I'm Out</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nSea Limited: A Bottom For Video Games Is Near, But Why I'm Out\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-03-05 19:42 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4675730-sea-limited-bottom-for-video-games-near-why-i-sold-stock><strong>Seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummarySea Limited reported solid Q4 results with aggressive e-commerce growth boosting top-line numbers but diluting overall profitability.Management expects another profitable year in 2024, calming ...</p>\n\n<a href=\"https://seekingalpha.com/article/4675730-sea-limited-bottom-for-video-games-near-why-i-sold-stock\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"SE","symbol_name":"Sea Ltd","start_time":0,"source_url":"https://seekingalpha.com/article/4675730-sea-limited-bottom-for-video-games-near-why-i-sold-stock","article_id":"1163413007","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=1163413007","pubTimestamp":1709638963,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"SummarySea Limited reported solid Q4 results with aggressive e-commerce growth boosting top-line numbers but diluting overall profitability.Management expects another profitable year in 2024, calming ","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"SE":"Sea Ltd"},"translate_title":"海洋有限公司：视频游戏的底部即将到来，但为什么我会出局","themeId":"","isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"SE":1.1},"content_text":"SummarySea Limited reported solid Q4 results with aggressive e-commerce growth boosting top-line numbers but diluting overall profitability.Management expects another profitable year in 2024, calming concerns about aggressive promotional activity in e-commerce.I am lowering my valuation assumptions for the financial services business.I am downgrading Sea stock and have sold my position.The convenience of shopping online.Sea Limited saw choppy trading following its fourth quarter earnings release, with the stock trading higher double-digits pre-market before fading by early morning trading. The company reported solid results which showed some stabilization in the video game business along with aggressive growth in the e-commerce operations. Management has guided for 2024 to see “another profitable year,” which should calm some investors who might have feared overly aggressive promotional activity in e-commerce. Management also appeared to suggest that a bottom may be near for the video game segment, as they are guiding towards growth in bookings and users for their Free Fire game. I am now downgrading SE stock after adjusting my estimated valuation for the fintech business from “buy” to “neutral.”Sea Limited Stock PriceSea Limited stock is seemingly one of the few tech stocks which are still trading near multi-year lows. The company has struggled to adapt to the higher interest rate environment, as that threw a wrench in its ability to balance growth and profitability.I last covered SE in September, where I rated the stock a buy on account of both the improving fundamental picture as well as the potential for Indonesia to ban TikTok from e-commerce operations in the country. TikTok has since made an investment in Indonesia-based GoTo and appears close to resuming e-commerce operations.SE Stock Key MetricsIn its most recent quarter, Sea Limited generated 5% YoY revenue growth to $3.62 billion, beating consensus estimates for $3.55 billion.revenueRevenue growth was led by 23% YoY growth in e-commerce revenues, though this segment saw adjusted EBITDA swing negative.e-commerceManagement has previously outlined expectations to invest heavily in promotional activity to gain e-commerce market share, and this showed with sales & marketing expenses doubling YoY. The company otherwise showed decent cost discipline across the other expense buckets.costsThe company’s video game segment returned to being the “cash cow” for the company, though growth remains pressured here as the company has struggled to grow its user base.digital entertainmentPrior to 2022, SE had historically “reinvested” video game profits to fund e-commerce losses. That dynamic shifted last year when the company began posting profits in its e-commerce divisions. But it appears that the company is back to its old ways, though its financial services division is now helping to contribute positively to the bottom line.adjusted EBITDAThe company generated a slim GAAP net income loss in the quarter, but still managed to close out 2023 with positive GAAP net income generation.net incomeSE ended the quarter with $8.5 billion in cash versus $3.3 billion in convertible notes. With profitability right around break even, this net cash balance sheet helps to reduce the risk profile of the stock.Management shared some thoughts on their outlook for 2024. Management expects their top game Free Fire to “grow double-digits year-on-year for both user base and bookings in 2024.” That might imply that the Digital Entertainment segment may begin to see a “bottom” in its financial struggles, given that Free Fire should be the vast majority of the video game business. This addresses a critical bear thesis, namely, just when the video game business might stop bleeding.Management noted that their e-commerce segment Shopee has gained market share in 2023 and they “intend to maintain our market share in 2024.” Management expects Shopee to see “high teens” growth in 2024 GMV and for adjusted EBITDA “to turn positive in the second half of this year.”Finally, management noted that they expect 2024 to be “another profitable year” on a consolidated basis.Is SE Stock A Buy, Sell, or Hold?As of recent prices, SE traded at around 30x 2024 consensus earnings estimates, which operating leverage expected to drive earnings sharply higher thereafter.consensus estimatesConsensus estimates have SE growing revenues at a healthy double-digit pace moving forward.consensus estimatesI have a hunch that consensus estimates may prove optimistic on both fronts. I would not be surprised to see SE deliver double-digit growth this year given that the company will be lapping easier comparables, but I question whether the company can sustain double-digit growth in the years after. I also question whether the company can really deliver the expected operating leverage in 2025 given that e-commerce growth remains dilutive to the overall profitability.I once again use a sum-of-the-parts valuation methodology for the company. I assume that the e-commerce segment can sustain 15% top-line growth for many years, justifying a 1.5x sales multiple, or a $15 billion valuation. I continue to use a 5x adjusted EBITDA target for the digital entertainment segment, which yields around $4.5 billion in value. I previously applied a 12x multiple for the financial services segment, but in hindsight this multiple is too optimistic given that U.S. based fintech operators like Block (SQ), Lightspeed (LSPD), and others are trading at valuations around 5x gross profits. I now instead apply a 5x sales multiple for the financial services segment, yielding a valuation of $10 billion. I do not include value from the net cash balance sheet due to uncertainty with regard to the aggressiveness of the e-commerce investment.That leads to a total valuation of $29.5 billion. The stock currently trades at around $29 billion, implying minimal upside to that estimate. I would typically be applying a 20% conglomerate discount, and hoping for at least 20% upside to that target. Between the stock’s strong rally over the last several months, as well as my reduced fair value estimate, the stock no longer looks attractive from a risk-reward perspective.There may be upside to my targets, particularly in the digital entertainment segment, but the surging broader markets may warrant a more risk-adverse mindset. I am downgrading Sea Limited stock from “buy” to a “neutral” rating until the valuation proposition improves.","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":0},"commentList":[{"id":281091553824976,"gmtCreate":1709650417135,"gmtModify":1709650851391,"author":{"id":"4102495020619380","authorId":"4102495020619380","name":"romanc9","avatar":"https://static.tigerbbs.com/76bfe37245defa055adfff7453f1520f","vip":1,"hat":"https://static.tigerbbs.com/b073a07f77dbe6b3bec6b12311fde6bd","crmLevel":2,"crmLevelSwitch":1,"authorIdStr":"4102495020619380","idStr":"4102495020619380"},"htmlText":"See some idiotic analyst or writer, after clearing their position and make profit, downgraded it and then when down they pick up again and upgrade and the processes go all over again..&nbsp;","listText":"See some idiotic analyst or writer, after clearing their position and make profit, downgraded it and then when down they pick up again and upgrade and the processes go all over again..&nbsp;","text":"See some idiotic analyst or writer, after clearing their position and make profit, downgraded it and then when down they pick up again and upgrade and the processes go all over again..","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/281091553824976","repostId":1163413007,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":281047638798584,"gmtCreate":1709639791329,"gmtModify":1709639794781,"author":{"id":"3566892305869986","authorId":"3566892305869986","name":"Daytraderz","avatar":"https://community-static.tradeup.com/news/c6aa63fcedaf21ebd5f2a19334f63825","vip":1,"hat":"https://static.tigerbbs.com/0a8758340a08196056f8bc1e54805193","crmLevel":7,"crmLevelSwitch":1,"authorIdStr":"3566892305869986","idStr":"3566892305869986"},"htmlText":"U sell means its going go up","listText":"U sell means its going go up","text":"U sell means its going go up","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/281047638798584","repostId":1163413007,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":10,"commentSize":2,"repostSize":3,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false}}