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Sea Limited: Solid Growth And Improved Profitability Profile - Better Late Than Never

seekingalpha05-20

SE has outperformed the market thus far, thanks to its solid performance across the E-commerce, Finance, and Gaming segments, exceeding expectations.The management's reiterated FY2024 guidance has ...

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Mr Mooney
·05-20
Time to sell. Valuation is around $43
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setia100
·05-20
Asian currencies depreciation resulting in inflation & reduction in disposable income are the headwinds to SEA.❗🤔
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Better Late Than Never\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-05-20 11:50 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4694365-sea-limited-solid-growth-and-improved-profitability-profile-better-late-than-never><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SE has outperformed the market thus far, thanks to its solid performance across the E-commerce, Finance, and Gaming segments, exceeding expectations.The management's reiterated FY2024 guidance has ...</p>\n\n<a href=\"https://seekingalpha.com/article/4694365-sea-limited-solid-growth-and-improved-profitability-profile-better-late-than-never\">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":"LU0310799852.SGD","symbol_name":"FTIF - Templeton Global Equity Income A MDIS SGD","start_time":0,"source_url":"https://seekingalpha.com/article/4694365-sea-limited-solid-growth-and-improved-profitability-profile-better-late-than-never","article_id":"2436164995","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2436164995","pubTimestamp":1716177045,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"SE has outperformed the market thus far, thanks to its solid performance across the E-commerce, Finance, and Gaming segments, exceeding expectations.The management's reiterated FY2024 guidance has als","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU0310799852.SGD":"FTIF - 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Investors beware.We previously covered Sea Limited (NYSE:NYSE:SE) in March 2024, discussing its impressive FQ4'23 earnings results, which had triggered the stock's immense recovery well exceeding the wider market then.While there appeared to be great near-term tailwinds, readers must not forget that these were only attributed to TikTok Shop's inactive e-commerce presence in Indonesia, with things likely to dramatically change once the GoTo/ TikTok Shop platform was launched, resulting in our Hold rating then.Since then, SE has further rallied by +21.9%, well outperforming the wider market at +2.7%. It is apparent that we have missed the boat again, especially since Shopee continues to record solid growth across all metrics while narrowing its losses in FQ1'24, despite the launch of GoTo/ TikTok Shop in early 2024.With the management still reiterating its FY2024 guidance while maintaining a healthy balance sheet, we believe that it is time to upgrade the SE stock as a Buy, attributed to the robust capital appreciation prospects.The SE Investment Thesis Remains Robust, Despite The Impressive Rally Thus FarFor now, SE has reported a mixed FQ1'24 earnings call, with overall revenues of $3.73B (+3.3% QoQ/ +22.6% YoY) and adj EBITDA of $401.14M (+216.6% QoQ/ -20.9% YoY).Much of its top-line tailwinds are attributed to the e-commerce segment, with $2.4B of marketplace revenues (+4.3% QoQ/ +33.3% YoY) as gross orders grow to 2.6B (+4% QoQ/ +56.8% YoY) and Gross Merchandise Volume to $23.6B (+2.1% QoQ/ +36.3% YoY).This is an impressive feat indeed, despite GoTo/ TikTok's (GOTO-INDONESIA) integration from January 31, 2024 onwards and the supposed accretive impact on the e-commerce segment's cash flow, signaling Shopee's robust mindshare thus far.This is on top of SE's robust revenues from the Digital Financial Services at $499.4M (+5.7% QoQ/ +20.9% YoY), though dragged down by the Digital Entertainment segment at $458.1M (-10.3% QoQ/ -15.1% YoY) in the latest quarter.Even so, with the Digital Entertainment segment still reporting growing Bookings of $512.1M (+12.2% QoQ/ +10.7% YoY) and increasing quarterly paying users of 48.9M (+9.2M QoQ/ +11.3M YoY), we believe that revenue recognition is only a matter of time.This is mostly attributed to the numerous new game version updates, allowing Free Fire to retain existing users while attracting new gamers, allowing it to remain \"the most downloaded mobile game globally in the first quarter.\"Unfortunately, while SE's E-commerce business is undoubtedly the top-line driver, it continues to burn cash albeit at a slowing rate with adj EBITDA of -$21.7M (+90.3% QoQ/ -110.4% YoY) and margins of -0.8% (+7.8 points QoQ/ -10.6 YoY).With the Digital Financial Services and Digital Entertainment segments remaining the bottom-line drivers with adj EBITDA of $148.7M (inline QoQ/ +50.3% YoY) and $292.2M (+34.4% QoQ/ +27% YoY), respectively, it is unsurprising that the overall company's bottom-line continues to underwhelm thus far.Even so, the SE management continues to reiterate its FY2024 guidance with \"Shopee's adj EBITDA to turn positive in H2'24,\" signaling its \"clear roadmap for profitable growth.\"Assuming so, we may see the cash burn moderate from henceforth, with its balance sheet likely to stabilize at cash/ short-term investments of $5.4B (+0.9% QoQ/ -17.9% YoY) as reported in FQ1'24.The Consensus Forward EstimatesTikr TerminalPerhaps this is also why the consensus have raised their forward estimates, with SE expected to generate an accelerated top/ bottom line expansion at a CAGR of +14.3%/ +89.8% through FY2026.This is compared to the previous estimates of +8.6%/ +27.6% and the historical top-line growth at +69.4% between FY2017 and FY2023, respectively.At the same time, the consensus continue to project robust Free Cash Flow generation moving forward, implying the SE management's ability to opportunistically invest in its growth while addressing the $168.41M of its debts due in 2024, $1.17B in 2025, and $1.55B in 2026.SE 2Y Stock PriceTrading ViewFor now, market reactions appear to be optimistic, with SE rapidly rallying while trading above its 50/ 100/ 200 day moving averages.SE ValuationsSeeking AlphaAt the same time, given the accelerated top/ bottom line growth prospects, SE appears to be reasonably valued at FWD EV/ EBITDA of 26.94x and FWD P/E of 37.84x, higher than the previous article at 23.35x/ 33.03x and the 1Y mean at 21.49x/ 38.14x, respectively.SE does not appear to be expensive compared to its diversified e-commerce and fintech peers, such as Amazon (AMZN) at 14.64x/ 41.11x and MercadoLibre (MELI) at 26.51x/ 49.85x, respectively, with the profitable growth further underscoring its viable investment thesis.With SE currently reporting lumpy adj EPS profitability, we will be referring to its adj EBITDA generation instead. Based on the LTM adj EBITDA of $1.09B (+187.9% sequentially) and the 598.69M of shares outstanding, we are looking at an adj EBITDA generation of $1.82 per share.Combined with the EV/ EBITDA valuation of 26.94x, it appears that the stock is trading at a notable premium of +45.7% compared to our fair value estimates of $49.Despite so, based on a similar calculation method using the consensus FY2026 adj EBITDA estimates of $2.75B and consequently, adj EBITDA per share of $4.59 then (expanding at an impressive CAGR of +36.1%), there appears to be an excellent upside potential of +73% to our long-term price target of $123.60.So, Is SE Stock A Buy, Sell, or Hold?As a result of the attractive risk reward ratio, we are cautiously rerating the SE stock as a Buy. With the stock already breaking out of its previous resistance levels of $67s, interested investors may want to observe its movement before adding according to their dollar cost average and risk appetite.It goes without saying that SE still faces intense e-commerce competition in the Southeast Asian market from multiple deep pocketed players, including GoTo/ TikTok and Alibaba's (BABA) Lazada, along with new players such as Temu and Shein.This also means that SE is quite likely to increase its investments/ marketing efforts into Shopee, potentially eroding its profit margins as observed in the elevated sales and marketing expenses at $769.63M (-20.4% QoQ/ +92.3% YoY) in FQ1'24.At the same time, the management continues to ramp up Shopee's content ecosystem, while sustaining its live streaming efforts and improving its logistics management, in an effort to boost the stickiness and experience of its consumer base.As a result, investors may want to temper their near-term expectations, with the FY2024 positive adj EBITDA margins potentially being underwhelming and FY2025 likely to being forth improved numbers.","kind":"highlight","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":307930337562744,"gmtCreate":1716200237489,"gmtModify":1716200242806,"author":{"id":"3583044537429562","authorId":"3583044537429562","name":"Mr Mooney","avatar":"https://community-static.tradeup.com/news/6836340f20d36afa666f6d8d4b0a929d","vip":1,"crmLevel":5,"crmLevelSwitch":0,"idStr":"3583044537429562","authorIdStr":"3583044537429562"},"htmlText":"Time to sell. Valuation is around $43","listText":"Time to sell. Valuation is around $43","text":"Time to sell. Valuation is around $43","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/307930337562744","repostId":2436164995,"repostType":4,"repost":{"id":"2436164995","kind":"highlight","pubTimestamp":1716177045,"share":"https://ttm.financial/m/news/2436164995?lang=&edition=fundamental","pubTime":"2024-05-20 11:50","market":"us","language":"en","title":"Sea Limited: Solid Growth And Improved Profitability Profile - Better Late Than Never","url":"https://stock-news.laohu8.com/highlight/detail?id=2436164995","media":"seekingalpha","summary":"SE has outperformed the market thus far, thanks to its solid performance across the E-commerce, Finance, and Gaming segments, exceeding expectations.The management's reiterated FY2024 guidance has als","content":"<html><head></head><body><ul style=\"\"><li><p>SE has outperformed the market thus far, thanks to its solid performance across the E-commerce, Finance, and Gaming segments, exceeding expectations.</p></li><li><p>The management&#39;s reiterated FY2024 guidance has also contributed to the raised consensus forward estimates through FY2026.</p></li><li><p>Combined with the healthy balance sheet and minimal near-term risks from GoTo/ TikTok, we believe that SE appears to be reasonably valued compared to its peers.</p></li><li><p>The management continues to ramp up Shopee&#39;s content ecosystem, while sustaining its live streaming efforts and improving its logistics management, boosting the stickiness/ experience of its consumer base.</p></li><li><p>However, this also means that SE&#39;s FY2024 positive adj EBITDA margins may potentially be underwhelming. Investors beware.</p></li></ul><p>We previously covered Sea Limited (NYSE:NYSE:SE) in March 2024, discussing its impressive FQ4&#39;23 earnings results, which had triggered the stock&#39;s immense recovery well exceeding the wider market then.</p><p>While there appeared to be great near-term tailwinds, readers must not forget that these were only attributed to TikTok Shop&#39;s inactive e-commerce presence in Indonesia, with things likely to dramatically change once the GoTo/ TikTok Shop platform was launched, resulting in our Hold rating then.</p><p>Since then, SE has further rallied by +21.9%, well outperforming the wider market at +2.7%. It is apparent that we have missed the boat again, especially since Shopee continues to record solid growth across all metrics while narrowing its losses in FQ1&#39;24, despite the launch of GoTo/ TikTok Shop in early 2024.</p><p>With the management still reiterating its FY2024 guidance while maintaining a healthy balance sheet, we believe that it is time to upgrade the SE stock as a Buy, attributed to the robust capital appreciation prospects.</p><h2 id=\"id_2858666594\">The SE Investment Thesis Remains Robust, Despite The Impressive Rally Thus Far</h2><p>For now, SE has reported a mixed FQ1&#39;24 earnings call, with overall revenues of $3.73B (+3.3% QoQ/ +22.6% YoY) and adj EBITDA of $401.14M (+216.6% QoQ/ -20.9% YoY).</p><p>Much of its top-line tailwinds are attributed to the e-commerce segment, with $2.4B of marketplace revenues (+4.3% QoQ/ +33.3% YoY) as gross orders grow to 2.6B (+4% QoQ/ +56.8% YoY) and Gross Merchandise Volume to $23.6B (+2.1% QoQ/ +36.3% YoY).</p><p>This is an impressive feat indeed, despite GoTo/ TikTok&#39;s (GOTO-INDONESIA) integration from January 31, 2024 onwards and the supposed accretive impact on the e-commerce segment&#39;s cash flow, signaling Shopee&#39;s robust mindshare thus far.</p><p>This is on top of SE&#39;s robust revenues from the Digital Financial Services at $499.4M (+5.7% QoQ/ +20.9% YoY), though dragged down by the Digital Entertainment segment at $458.1M (-10.3% QoQ/ -15.1% YoY) in the latest quarter.</p><p>Even so, with the Digital Entertainment segment still reporting growing Bookings of $512.1M (+12.2% QoQ/ +10.7% YoY) and increasing quarterly paying users of 48.9M (+9.2M QoQ/ +11.3M YoY), we believe that revenue recognition is only a matter of time.</p><p>This is mostly attributed to the numerous new game version updates, allowing Free Fire to retain existing users while attracting new gamers, allowing it to remain &#34;the most downloaded mobile game globally in the first quarter.&#34;</p><p>Unfortunately, while SE&#39;s E-commerce business is undoubtedly the top-line driver, it continues to burn cash albeit at a slowing rate with adj EBITDA of -$21.7M (+90.3% QoQ/ -110.4% YoY) and margins of -0.8% (+7.8 points QoQ/ -10.6 YoY).</p><p>With the Digital Financial Services and Digital Entertainment segments remaining the bottom-line drivers with adj EBITDA of $148.7M (inline QoQ/ +50.3% YoY) and $292.2M (+34.4% QoQ/ +27% YoY), respectively, it is unsurprising that the overall company&#39;s bottom-line continues to underwhelm thus far.</p><p>Even so, the SE management continues to reiterate its FY2024 guidance with &#34;Shopee&#39;s adj EBITDA to turn positive in H2&#39;24,&#34; signaling its &#34;clear roadmap for profitable growth.&#34;</p><p>Assuming so, we may see the cash burn moderate from henceforth, with its balance sheet likely to stabilize at cash/ short-term investments of $5.4B (+0.9% QoQ/ -17.9% YoY) as reported in FQ1&#39;24.</p><p><strong>The Consensus Forward Estimates</strong></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/c0f3b9eb5f7b04b56315d34fe0d256e0\" alt=\"Tikr Terminal\" title=\"Tikr Terminal\" tg-width=\"640\" tg-height=\"305\"/><span>Tikr Terminal</span></p><p>Perhaps this is also why the consensus have raised their forward estimates, with SE expected to generate an accelerated top/ bottom line expansion at a CAGR of +14.3%/ +89.8% through FY2026.</p><p>This is compared to the previous estimates of +8.6%/ +27.6% and the historical top-line growth at +69.4% between FY2017 and FY2023, respectively.</p><p>At the same time, the consensus continue to project robust Free Cash Flow generation moving forward, implying the SE management&#39;s ability to opportunistically invest in its growth while addressing the $168.41M of its debts due in 2024, $1.17B in 2025, and $1.55B in 2026.</p><p><strong>SE 2Y Stock Price</strong></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/0cc63f0a82c9dae125547bd3a7a51b3f\" alt=\"Trading View\" title=\"Trading View\" tg-width=\"640\" tg-height=\"359\"/><span>Trading View</span></p><p>For now, market reactions appear to be optimistic, with SE rapidly rallying while trading above its 50/ 100/ 200 day moving averages.</p><p><strong>SE Valuations</strong></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/0d27127e4282ccc7ab24ecee51b350cf\" alt=\"Seeking Alpha\" title=\"Seeking Alpha\" tg-width=\"640\" tg-height=\"225\"/><span>Seeking Alpha</span></p><p>At the same time, given the accelerated top/ bottom line growth prospects, SE appears to be reasonably valued at FWD EV/ EBITDA of 26.94x and FWD P/E of 37.84x, higher than the previous article at 23.35x/ 33.03x and the 1Y mean at 21.49x/ 38.14x, respectively.</p><p>SE does not appear to be expensive compared to its diversified e-commerce and fintech peers, such as Amazon (AMZN) at 14.64x/ 41.11x and <a href=\"https://laohu8.com/S/MELI\">MercadoLibre</a> (MELI) at 26.51x/ 49.85x, respectively, with the profitable growth further underscoring its viable investment thesis.</p><p>With SE currently reporting lumpy adj EPS profitability, we will be referring to its adj EBITDA generation instead. Based on the LTM adj EBITDA of $1.09B (+187.9% sequentially) and the 598.69M of shares outstanding, we are looking at an adj EBITDA generation of $1.82 per share.</p><p>Combined with the EV/ EBITDA valuation of 26.94x, it appears that the stock is trading at a notable premium of +45.7% compared to our fair value estimates of $49.</p><p>Despite so, based on a similar calculation method using the consensus FY2026 adj EBITDA estimates of $2.75B and consequently, adj EBITDA per share of $4.59 then (expanding at an impressive CAGR of +36.1%), there appears to be an excellent upside potential of +73% to our long-term price target of $123.60.</p><h2 id=\"id_3329094506\">So, Is SE Stock A Buy, Sell, or Hold?</h2><p>As a result of the attractive risk reward ratio, we are cautiously rerating the SE stock as a Buy. With the stock already breaking out of its previous resistance levels of $67s, interested investors may want to observe its movement before adding according to their dollar cost average and risk appetite.</p><p>It goes without saying that SE still faces intense e-commerce competition in the Southeast Asian market from multiple deep pocketed players, including GoTo/ TikTok and Alibaba&#39;s (BABA) Lazada, along with new players such as Temu and Shein.</p><p>This also means that SE is quite likely to increase its investments/ marketing efforts into Shopee, potentially eroding its profit margins as observed in the elevated sales and marketing expenses at $769.63M (-20.4% QoQ/ +92.3% YoY) in FQ1&#39;24.</p><p>At the same time, the management continues to ramp up Shopee&#39;s content ecosystem, while sustaining its live streaming efforts and improving its logistics management, in an effort to boost the stickiness and experience of its consumer base.</p><p>As a result, investors may want to temper their near-term expectations, with the FY2024 positive adj EBITDA margins potentially being underwhelming and FY2025 likely to being forth improved numbers.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; 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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: Solid Growth And Improved Profitability Profile - Better Late Than Never\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-05-20 11:50 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4694365-sea-limited-solid-growth-and-improved-profitability-profile-better-late-than-never><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SE has outperformed the market thus far, thanks to its solid performance across the E-commerce, Finance, and Gaming segments, exceeding expectations.The management's reiterated FY2024 guidance has ...</p>\n\n<a href=\"https://seekingalpha.com/article/4694365-sea-limited-solid-growth-and-improved-profitability-profile-better-late-than-never\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"LU0210535034.USD":"摩根大通拉丁美洲基金","LU0390134368.USD":"FRANKLIN GLOBAL GROWTH \"A\" (USD) ACC","SG9999002604.SGD":"LionGlobal Singapore/Malaysia SGD","SE":"Sea Ltd","LU1823568750.SGD":"Fidelity Global Technology A-ACC SGD","LU0310799852.SGD":"FTIF - Templeton Global Equity Income A MDIS SGD","LU0082616367.USD":"摩根大通美国科技A（dist）","LU0128525689.USD":"TEMPLETON GLOBAL BALANCED \"A\"(USD) ACC","BK4220":"综合零售","LU0109392836.USD":"富兰克林科技股A","LU0067412154.USD":"UBS (LUX) EQUITY FUND -  CHINA OPPORTUNITY \"P\" (USD) ACC","LU1105468828.SGD":"Allianz Total Return Asian Equity AM DIS H2-SGD","LU0210637038.USD":"HSBC GIF THAI EQUITY \"AD\" INC","BK4588":"碎股","LU0348814723.USD":"ALLIANZ TOTAL RETURN ASIAN EQUITY \"A\" (USD) INC  NC","LU0130102774.USD":"Natixis Harris Associates US Equity RA USD","BK4503":"景林资产持仓","LU1688375341.USD":"贝莱德中国灵活股票基金","LU0532188223.SGD":"JPMorgan Funds - ASEAN Equity A (acc) SGD","BK4502":"阿里概念","LU0198837287.USD":"UBS (LUX) EQUITY SICAV - USA GROWTH \"P\" (USD) ACC","LU0456842615.SGD":"JPMorgan Funds - Emerging Markets Equity A (acc) SGD","LU0786609619.USD":"高盛全球千禧一代股票组合Acc","BK4505":"高瓴资本持仓","LU0130103400.USD":"Natixis Harris Associates Global Equity RA USD","IE00BFSS8Q28.SGD":"Janus Henderson Balanced A Inc SGD-H","LU0149725797.USD":"汇丰美国股市经济规模基金","LU0354030511.USD":"ALLSPRING  U.S. LARGE CAP GROWTH \"I\" (USD) ACC","BK4504":"桥水持仓","LU0918141887.USD":"安联亚洲实际收益股票基金","LU0651946864.USD":"贝莱德新兴市场股票收益A2","SG9999002406.SGD":"利安新加坡信托基金","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","IE00BJTD4N35.SGD":"Neuberger Berman US Long Short Equity A1  Acc SGD-H","LU1051768304.USD":"贝莱德新兴市场股票收益A6","LU0348816934.USD":"ALLIANZ TOTAL RETURN ASIAN EQUITY \"AT\" (USD)","SG9999002620.SGD":"LionGlobal South East Asia SGD","LU0251143458.SGD":"Fidelity Emerging Markets A-SGD","LU1046422090.SGD":"Fidelity Pacific A-SGD","SG9999004360.SGD":"Nikko AM Shenton Thrift Fund SGD","LU1515016050.SGD":"Blackrock Emerging Markets Equity Income A6 SGD-H","LU0234570918.USD":"高盛全球核心股票组合Acc Close","LU0109391861.USD":"富兰克林美国机遇基金A Acc","IE00BJTD4V19.USD":"NEUBERGER BERMAN US LONG SHORT EQUITY \"A1\" (USD) ACC","LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元","GB00BDT5M118.USD":"天利环球扩展Alpha基金A Acc"},"source_url":"https://seekingalpha.com/article/4694365-sea-limited-solid-growth-and-improved-profitability-profile-better-late-than-never","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2436164995","content_text":"SE has outperformed the market thus far, thanks to its solid performance across the E-commerce, Finance, and Gaming segments, exceeding expectations.The management's reiterated FY2024 guidance has also contributed to the raised consensus forward estimates through FY2026.Combined with the healthy balance sheet and minimal near-term risks from GoTo/ TikTok, we believe that SE appears to be reasonably valued compared to its peers.The management continues to ramp up Shopee's content ecosystem, while sustaining its live streaming efforts and improving its logistics management, boosting the stickiness/ experience of its consumer base.However, this also means that SE's FY2024 positive adj EBITDA margins may potentially be underwhelming. Investors beware.We previously covered Sea Limited (NYSE:NYSE:SE) in March 2024, discussing its impressive FQ4'23 earnings results, which had triggered the stock's immense recovery well exceeding the wider market then.While there appeared to be great near-term tailwinds, readers must not forget that these were only attributed to TikTok Shop's inactive e-commerce presence in Indonesia, with things likely to dramatically change once the GoTo/ TikTok Shop platform was launched, resulting in our Hold rating then.Since then, SE has further rallied by +21.9%, well outperforming the wider market at +2.7%. It is apparent that we have missed the boat again, especially since Shopee continues to record solid growth across all metrics while narrowing its losses in FQ1'24, despite the launch of GoTo/ TikTok Shop in early 2024.With the management still reiterating its FY2024 guidance while maintaining a healthy balance sheet, we believe that it is time to upgrade the SE stock as a Buy, attributed to the robust capital appreciation prospects.The SE Investment Thesis Remains Robust, Despite The Impressive Rally Thus FarFor now, SE has reported a mixed FQ1'24 earnings call, with overall revenues of $3.73B (+3.3% QoQ/ +22.6% YoY) and adj EBITDA of $401.14M (+216.6% QoQ/ -20.9% YoY).Much of its top-line tailwinds are attributed to the e-commerce segment, with $2.4B of marketplace revenues (+4.3% QoQ/ +33.3% YoY) as gross orders grow to 2.6B (+4% QoQ/ +56.8% YoY) and Gross Merchandise Volume to $23.6B (+2.1% QoQ/ +36.3% YoY).This is an impressive feat indeed, despite GoTo/ TikTok's (GOTO-INDONESIA) integration from January 31, 2024 onwards and the supposed accretive impact on the e-commerce segment's cash flow, signaling Shopee's robust mindshare thus far.This is on top of SE's robust revenues from the Digital Financial Services at $499.4M (+5.7% QoQ/ +20.9% YoY), though dragged down by the Digital Entertainment segment at $458.1M (-10.3% QoQ/ -15.1% YoY) in the latest quarter.Even so, with the Digital Entertainment segment still reporting growing Bookings of $512.1M (+12.2% QoQ/ +10.7% YoY) and increasing quarterly paying users of 48.9M (+9.2M QoQ/ +11.3M YoY), we believe that revenue recognition is only a matter of time.This is mostly attributed to the numerous new game version updates, allowing Free Fire to retain existing users while attracting new gamers, allowing it to remain \"the most downloaded mobile game globally in the first quarter.\"Unfortunately, while SE's E-commerce business is undoubtedly the top-line driver, it continues to burn cash albeit at a slowing rate with adj EBITDA of -$21.7M (+90.3% QoQ/ -110.4% YoY) and margins of -0.8% (+7.8 points QoQ/ -10.6 YoY).With the Digital Financial Services and Digital Entertainment segments remaining the bottom-line drivers with adj EBITDA of $148.7M (inline QoQ/ +50.3% YoY) and $292.2M (+34.4% QoQ/ +27% YoY), respectively, it is unsurprising that the overall company's bottom-line continues to underwhelm thus far.Even so, the SE management continues to reiterate its FY2024 guidance with \"Shopee's adj EBITDA to turn positive in H2'24,\" signaling its \"clear roadmap for profitable growth.\"Assuming so, we may see the cash burn moderate from henceforth, with its balance sheet likely to stabilize at cash/ short-term investments of $5.4B (+0.9% QoQ/ -17.9% YoY) as reported in FQ1'24.The Consensus Forward EstimatesTikr TerminalPerhaps this is also why the consensus have raised their forward estimates, with SE expected to generate an accelerated top/ bottom line expansion at a CAGR of +14.3%/ +89.8% through FY2026.This is compared to the previous estimates of +8.6%/ +27.6% and the historical top-line growth at +69.4% between FY2017 and FY2023, respectively.At the same time, the consensus continue to project robust Free Cash Flow generation moving forward, implying the SE management's ability to opportunistically invest in its growth while addressing the $168.41M of its debts due in 2024, $1.17B in 2025, and $1.55B in 2026.SE 2Y Stock PriceTrading ViewFor now, market reactions appear to be optimistic, with SE rapidly rallying while trading above its 50/ 100/ 200 day moving averages.SE ValuationsSeeking AlphaAt the same time, given the accelerated top/ bottom line growth prospects, SE appears to be reasonably valued at FWD EV/ EBITDA of 26.94x and FWD P/E of 37.84x, higher than the previous article at 23.35x/ 33.03x and the 1Y mean at 21.49x/ 38.14x, respectively.SE does not appear to be expensive compared to its diversified e-commerce and fintech peers, such as Amazon (AMZN) at 14.64x/ 41.11x and MercadoLibre (MELI) at 26.51x/ 49.85x, respectively, with the profitable growth further underscoring its viable investment thesis.With SE currently reporting lumpy adj EPS profitability, we will be referring to its adj EBITDA generation instead. Based on the LTM adj EBITDA of $1.09B (+187.9% sequentially) and the 598.69M of shares outstanding, we are looking at an adj EBITDA generation of $1.82 per share.Combined with the EV/ EBITDA valuation of 26.94x, it appears that the stock is trading at a notable premium of +45.7% compared to our fair value estimates of $49.Despite so, based on a similar calculation method using the consensus FY2026 adj EBITDA estimates of $2.75B and consequently, adj EBITDA per share of $4.59 then (expanding at an impressive CAGR of +36.1%), there appears to be an excellent upside potential of +73% to our long-term price target of $123.60.So, Is SE Stock A Buy, Sell, or Hold?As a result of the attractive risk reward ratio, we are cautiously rerating the SE stock as a Buy. With the stock already breaking out of its previous resistance levels of $67s, interested investors may want to observe its movement before adding according to their dollar cost average and risk appetite.It goes without saying that SE still faces intense e-commerce competition in the Southeast Asian market from multiple deep pocketed players, including GoTo/ TikTok and Alibaba's (BABA) Lazada, along with new players such as Temu and Shein.This also means that SE is quite likely to increase its investments/ marketing efforts into Shopee, potentially eroding its profit margins as observed in the elevated sales and marketing expenses at $769.63M (-20.4% QoQ/ +92.3% YoY) in FQ1'24.At the same time, the management continues to ramp up Shopee's content ecosystem, while sustaining its live streaming efforts and improving its logistics management, in an effort to boost the stickiness and experience of its consumer base.As a result, investors may want to temper their near-term expectations, with the FY2024 positive adj EBITDA margins potentially being underwhelming and FY2025 likely to being forth improved numbers.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":307800740163632,"gmtCreate":1716181826390,"gmtModify":1716181830116,"author":{"id":"3567852837945728","authorId":"3567852837945728","name":"setia100","avatar":"https://community-static.tradeup.com/news/5d07af59743ad001196b7aca5f1726d7","vip":1,"crmLevel":5,"crmLevelSwitch":0,"idStr":"3567852837945728","authorIdStr":"3567852837945728"},"htmlText":"Asian currencies depreciation&nbsp;resulting in inflation &amp; reduction in disposable income&nbsp;are the headwinds to SEA.❗🤔","listText":"Asian currencies depreciation&nbsp;resulting in inflation &amp; reduction in disposable income&nbsp;are the headwinds to SEA.❗🤔","text":"Asian currencies depreciation resulting in inflation & reduction in disposable income are the headwinds to SEA.❗🤔","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/307800740163632","repostId":2436164995,"repostType":2,"repost":{"id":"2436164995","kind":"highlight","pubTimestamp":1716177045,"share":"https://ttm.financial/m/news/2436164995?lang=&edition=fundamental","pubTime":"2024-05-20 11:50","market":"us","language":"en","title":"Sea Limited: Solid Growth And Improved Profitability Profile - Better Late Than Never","url":"https://stock-news.laohu8.com/highlight/detail?id=2436164995","media":"seekingalpha","summary":"SE has outperformed the market thus far, thanks to its solid performance across the E-commerce, Finance, and Gaming segments, exceeding expectations.The management's reiterated FY2024 guidance has als","content":"<html><head></head><body><ul style=\"\"><li><p>SE has outperformed the market thus far, thanks to its solid performance across the E-commerce, Finance, and Gaming segments, exceeding expectations.</p></li><li><p>The management&#39;s reiterated FY2024 guidance has also contributed to the raised consensus forward estimates through FY2026.</p></li><li><p>Combined with the healthy balance sheet and minimal near-term risks from GoTo/ TikTok, we believe that SE appears to be reasonably valued compared to its peers.</p></li><li><p>The management continues to ramp up Shopee&#39;s content ecosystem, while sustaining its live streaming efforts and improving its logistics management, boosting the stickiness/ experience of its consumer base.</p></li><li><p>However, this also means that SE&#39;s FY2024 positive adj EBITDA margins may potentially be underwhelming. Investors beware.</p></li></ul><p>We previously covered Sea Limited (NYSE:NYSE:SE) in March 2024, discussing its impressive FQ4&#39;23 earnings results, which had triggered the stock&#39;s immense recovery well exceeding the wider market then.</p><p>While there appeared to be great near-term tailwinds, readers must not forget that these were only attributed to TikTok Shop&#39;s inactive e-commerce presence in Indonesia, with things likely to dramatically change once the GoTo/ TikTok Shop platform was launched, resulting in our Hold rating then.</p><p>Since then, SE has further rallied by +21.9%, well outperforming the wider market at +2.7%. It is apparent that we have missed the boat again, especially since Shopee continues to record solid growth across all metrics while narrowing its losses in FQ1&#39;24, despite the launch of GoTo/ TikTok Shop in early 2024.</p><p>With the management still reiterating its FY2024 guidance while maintaining a healthy balance sheet, we believe that it is time to upgrade the SE stock as a Buy, attributed to the robust capital appreciation prospects.</p><h2 id=\"id_2858666594\">The SE Investment Thesis Remains Robust, Despite The Impressive Rally Thus Far</h2><p>For now, SE has reported a mixed FQ1&#39;24 earnings call, with overall revenues of $3.73B (+3.3% QoQ/ +22.6% YoY) and adj EBITDA of $401.14M (+216.6% QoQ/ -20.9% YoY).</p><p>Much of its top-line tailwinds are attributed to the e-commerce segment, with $2.4B of marketplace revenues (+4.3% QoQ/ +33.3% YoY) as gross orders grow to 2.6B (+4% QoQ/ +56.8% YoY) and Gross Merchandise Volume to $23.6B (+2.1% QoQ/ +36.3% YoY).</p><p>This is an impressive feat indeed, despite GoTo/ TikTok&#39;s (GOTO-INDONESIA) integration from January 31, 2024 onwards and the supposed accretive impact on the e-commerce segment&#39;s cash flow, signaling Shopee&#39;s robust mindshare thus far.</p><p>This is on top of SE&#39;s robust revenues from the Digital Financial Services at $499.4M (+5.7% QoQ/ +20.9% YoY), though dragged down by the Digital Entertainment segment at $458.1M (-10.3% QoQ/ -15.1% YoY) in the latest quarter.</p><p>Even so, with the Digital Entertainment segment still reporting growing Bookings of $512.1M (+12.2% QoQ/ +10.7% YoY) and increasing quarterly paying users of 48.9M (+9.2M QoQ/ +11.3M YoY), we believe that revenue recognition is only a matter of time.</p><p>This is mostly attributed to the numerous new game version updates, allowing Free Fire to retain existing users while attracting new gamers, allowing it to remain &#34;the most downloaded mobile game globally in the first quarter.&#34;</p><p>Unfortunately, while SE&#39;s E-commerce business is undoubtedly the top-line driver, it continues to burn cash albeit at a slowing rate with adj EBITDA of -$21.7M (+90.3% QoQ/ -110.4% YoY) and margins of -0.8% (+7.8 points QoQ/ -10.6 YoY).</p><p>With the Digital Financial Services and Digital Entertainment segments remaining the bottom-line drivers with adj EBITDA of $148.7M (inline QoQ/ +50.3% YoY) and $292.2M (+34.4% QoQ/ +27% YoY), respectively, it is unsurprising that the overall company&#39;s bottom-line continues to underwhelm thus far.</p><p>Even so, the SE management continues to reiterate its FY2024 guidance with &#34;Shopee&#39;s adj EBITDA to turn positive in H2&#39;24,&#34; signaling its &#34;clear roadmap for profitable growth.&#34;</p><p>Assuming so, we may see the cash burn moderate from henceforth, with its balance sheet likely to stabilize at cash/ short-term investments of $5.4B (+0.9% QoQ/ -17.9% YoY) as reported in FQ1&#39;24.</p><p><strong>The Consensus Forward Estimates</strong></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/c0f3b9eb5f7b04b56315d34fe0d256e0\" alt=\"Tikr Terminal\" title=\"Tikr Terminal\" tg-width=\"640\" tg-height=\"305\"/><span>Tikr Terminal</span></p><p>Perhaps this is also why the consensus have raised their forward estimates, with SE expected to generate an accelerated top/ bottom line expansion at a CAGR of +14.3%/ +89.8% through FY2026.</p><p>This is compared to the previous estimates of +8.6%/ +27.6% and the historical top-line growth at +69.4% between FY2017 and FY2023, respectively.</p><p>At the same time, the consensus continue to project robust Free Cash Flow generation moving forward, implying the SE management&#39;s ability to opportunistically invest in its growth while addressing the $168.41M of its debts due in 2024, $1.17B in 2025, and $1.55B in 2026.</p><p><strong>SE 2Y Stock Price</strong></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/0cc63f0a82c9dae125547bd3a7a51b3f\" alt=\"Trading View\" title=\"Trading View\" tg-width=\"640\" tg-height=\"359\"/><span>Trading View</span></p><p>For now, market reactions appear to be optimistic, with SE rapidly rallying while trading above its 50/ 100/ 200 day moving averages.</p><p><strong>SE Valuations</strong></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/0d27127e4282ccc7ab24ecee51b350cf\" alt=\"Seeking Alpha\" title=\"Seeking Alpha\" tg-width=\"640\" tg-height=\"225\"/><span>Seeking Alpha</span></p><p>At the same time, given the accelerated top/ bottom line growth prospects, SE appears to be reasonably valued at FWD EV/ EBITDA of 26.94x and FWD P/E of 37.84x, higher than the previous article at 23.35x/ 33.03x and the 1Y mean at 21.49x/ 38.14x, respectively.</p><p>SE does not appear to be expensive compared to its diversified e-commerce and fintech peers, such as Amazon (AMZN) at 14.64x/ 41.11x and <a href=\"https://laohu8.com/S/MELI\">MercadoLibre</a> (MELI) at 26.51x/ 49.85x, respectively, with the profitable growth further underscoring its viable investment thesis.</p><p>With SE currently reporting lumpy adj EPS profitability, we will be referring to its adj EBITDA generation instead. Based on the LTM adj EBITDA of $1.09B (+187.9% sequentially) and the 598.69M of shares outstanding, we are looking at an adj EBITDA generation of $1.82 per share.</p><p>Combined with the EV/ EBITDA valuation of 26.94x, it appears that the stock is trading at a notable premium of +45.7% compared to our fair value estimates of $49.</p><p>Despite so, based on a similar calculation method using the consensus FY2026 adj EBITDA estimates of $2.75B and consequently, adj EBITDA per share of $4.59 then (expanding at an impressive CAGR of +36.1%), there appears to be an excellent upside potential of +73% to our long-term price target of $123.60.</p><h2 id=\"id_3329094506\">So, Is SE Stock A Buy, Sell, or Hold?</h2><p>As a result of the attractive risk reward ratio, we are cautiously rerating the SE stock as a Buy. With the stock already breaking out of its previous resistance levels of $67s, interested investors may want to observe its movement before adding according to their dollar cost average and risk appetite.</p><p>It goes without saying that SE still faces intense e-commerce competition in the Southeast Asian market from multiple deep pocketed players, including GoTo/ TikTok and Alibaba&#39;s (BABA) Lazada, along with new players such as Temu and Shein.</p><p>This also means that SE is quite likely to increase its investments/ marketing efforts into Shopee, potentially eroding its profit margins as observed in the elevated sales and marketing expenses at $769.63M (-20.4% QoQ/ +92.3% YoY) in FQ1&#39;24.</p><p>At the same time, the management continues to ramp up Shopee&#39;s content ecosystem, while sustaining its live streaming efforts and improving its logistics management, in an effort to boost the stickiness and experience of its consumer base.</p><p>As a result, investors may want to temper their near-term expectations, with the FY2024 positive adj EBITDA margins potentially being underwhelming and FY2025 likely to being forth improved numbers.</p></body></html>","source":"seekingalpha","collect":0,"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: Solid Growth And Improved Profitability Profile - Better Late Than Never</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; 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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: Solid Growth And Improved Profitability Profile - Better Late Than Never\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-05-20 11:50 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4694365-sea-limited-solid-growth-and-improved-profitability-profile-better-late-than-never><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SE has outperformed the market thus far, thanks to its solid performance across the E-commerce, Finance, and Gaming segments, exceeding expectations.The management's reiterated FY2024 guidance has ...</p>\n\n<a href=\"https://seekingalpha.com/article/4694365-sea-limited-solid-growth-and-improved-profitability-profile-better-late-than-never\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"LU0210535034.USD":"摩根大通拉丁美洲基金","LU0390134368.USD":"FRANKLIN GLOBAL GROWTH \"A\" (USD) ACC","SG9999002604.SGD":"LionGlobal Singapore/Malaysia SGD","SE":"Sea Ltd","LU1823568750.SGD":"Fidelity Global Technology A-ACC SGD","LU0310799852.SGD":"FTIF - Templeton Global Equity Income A MDIS SGD","LU0082616367.USD":"摩根大通美国科技A（dist）","LU0128525689.USD":"TEMPLETON GLOBAL BALANCED \"A\"(USD) ACC","BK4220":"综合零售","LU0109392836.USD":"富兰克林科技股A","LU0067412154.USD":"UBS (LUX) EQUITY FUND -  CHINA OPPORTUNITY \"P\" (USD) ACC","LU1105468828.SGD":"Allianz Total Return Asian Equity AM DIS H2-SGD","LU0210637038.USD":"HSBC GIF THAI EQUITY \"AD\" INC","BK4588":"碎股","LU0348814723.USD":"ALLIANZ TOTAL RETURN ASIAN EQUITY \"A\" (USD) INC  NC","LU0130102774.USD":"Natixis Harris Associates US Equity RA USD","BK4503":"景林资产持仓","LU1688375341.USD":"贝莱德中国灵活股票基金","LU0532188223.SGD":"JPMorgan Funds - ASEAN Equity A (acc) SGD","BK4502":"阿里概念","LU0198837287.USD":"UBS (LUX) EQUITY SICAV - USA GROWTH \"P\" (USD) ACC","LU0456842615.SGD":"JPMorgan Funds - Emerging Markets Equity A (acc) SGD","LU0786609619.USD":"高盛全球千禧一代股票组合Acc","BK4505":"高瓴资本持仓","LU0130103400.USD":"Natixis Harris Associates Global Equity RA USD","IE00BFSS8Q28.SGD":"Janus Henderson Balanced A Inc SGD-H","LU0149725797.USD":"汇丰美国股市经济规模基金","LU0354030511.USD":"ALLSPRING  U.S. LARGE CAP GROWTH \"I\" (USD) ACC","BK4504":"桥水持仓","LU0918141887.USD":"安联亚洲实际收益股票基金","LU0651946864.USD":"贝莱德新兴市场股票收益A2","SG9999002406.SGD":"利安新加坡信托基金","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","IE00BJTD4N35.SGD":"Neuberger Berman US Long Short Equity A1  Acc SGD-H","LU1051768304.USD":"贝莱德新兴市场股票收益A6","LU0348816934.USD":"ALLIANZ TOTAL RETURN ASIAN EQUITY \"AT\" (USD)","SG9999002620.SGD":"LionGlobal South East Asia SGD","LU0251143458.SGD":"Fidelity Emerging Markets A-SGD","LU1046422090.SGD":"Fidelity Pacific A-SGD","SG9999004360.SGD":"Nikko AM Shenton Thrift Fund SGD","LU1515016050.SGD":"Blackrock Emerging Markets Equity Income A6 SGD-H","LU0234570918.USD":"高盛全球核心股票组合Acc Close","LU0109391861.USD":"富兰克林美国机遇基金A Acc","IE00BJTD4V19.USD":"NEUBERGER BERMAN US LONG SHORT EQUITY \"A1\" (USD) ACC","LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元","GB00BDT5M118.USD":"天利环球扩展Alpha基金A Acc"},"source_url":"https://seekingalpha.com/article/4694365-sea-limited-solid-growth-and-improved-profitability-profile-better-late-than-never","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2436164995","content_text":"SE has outperformed the market thus far, thanks to its solid performance across the E-commerce, Finance, and Gaming segments, exceeding expectations.The management's reiterated FY2024 guidance has also contributed to the raised consensus forward estimates through FY2026.Combined with the healthy balance sheet and minimal near-term risks from GoTo/ TikTok, we believe that SE appears to be reasonably valued compared to its peers.The management continues to ramp up Shopee's content ecosystem, while sustaining its live streaming efforts and improving its logistics management, boosting the stickiness/ experience of its consumer base.However, this also means that SE's FY2024 positive adj EBITDA margins may potentially be underwhelming. Investors beware.We previously covered Sea Limited (NYSE:NYSE:SE) in March 2024, discussing its impressive FQ4'23 earnings results, which had triggered the stock's immense recovery well exceeding the wider market then.While there appeared to be great near-term tailwinds, readers must not forget that these were only attributed to TikTok Shop's inactive e-commerce presence in Indonesia, with things likely to dramatically change once the GoTo/ TikTok Shop platform was launched, resulting in our Hold rating then.Since then, SE has further rallied by +21.9%, well outperforming the wider market at +2.7%. It is apparent that we have missed the boat again, especially since Shopee continues to record solid growth across all metrics while narrowing its losses in FQ1'24, despite the launch of GoTo/ TikTok Shop in early 2024.With the management still reiterating its FY2024 guidance while maintaining a healthy balance sheet, we believe that it is time to upgrade the SE stock as a Buy, attributed to the robust capital appreciation prospects.The SE Investment Thesis Remains Robust, Despite The Impressive Rally Thus FarFor now, SE has reported a mixed FQ1'24 earnings call, with overall revenues of $3.73B (+3.3% QoQ/ +22.6% YoY) and adj EBITDA of $401.14M (+216.6% QoQ/ -20.9% YoY).Much of its top-line tailwinds are attributed to the e-commerce segment, with $2.4B of marketplace revenues (+4.3% QoQ/ +33.3% YoY) as gross orders grow to 2.6B (+4% QoQ/ +56.8% YoY) and Gross Merchandise Volume to $23.6B (+2.1% QoQ/ +36.3% YoY).This is an impressive feat indeed, despite GoTo/ TikTok's (GOTO-INDONESIA) integration from January 31, 2024 onwards and the supposed accretive impact on the e-commerce segment's cash flow, signaling Shopee's robust mindshare thus far.This is on top of SE's robust revenues from the Digital Financial Services at $499.4M (+5.7% QoQ/ +20.9% YoY), though dragged down by the Digital Entertainment segment at $458.1M (-10.3% QoQ/ -15.1% YoY) in the latest quarter.Even so, with the Digital Entertainment segment still reporting growing Bookings of $512.1M (+12.2% QoQ/ +10.7% YoY) and increasing quarterly paying users of 48.9M (+9.2M QoQ/ +11.3M YoY), we believe that revenue recognition is only a matter of time.This is mostly attributed to the numerous new game version updates, allowing Free Fire to retain existing users while attracting new gamers, allowing it to remain \"the most downloaded mobile game globally in the first quarter.\"Unfortunately, while SE's E-commerce business is undoubtedly the top-line driver, it continues to burn cash albeit at a slowing rate with adj EBITDA of -$21.7M (+90.3% QoQ/ -110.4% YoY) and margins of -0.8% (+7.8 points QoQ/ -10.6 YoY).With the Digital Financial Services and Digital Entertainment segments remaining the bottom-line drivers with adj EBITDA of $148.7M (inline QoQ/ +50.3% YoY) and $292.2M (+34.4% QoQ/ +27% YoY), respectively, it is unsurprising that the overall company's bottom-line continues to underwhelm thus far.Even so, the SE management continues to reiterate its FY2024 guidance with \"Shopee's adj EBITDA to turn positive in H2'24,\" signaling its \"clear roadmap for profitable growth.\"Assuming so, we may see the cash burn moderate from henceforth, with its balance sheet likely to stabilize at cash/ short-term investments of $5.4B (+0.9% QoQ/ -17.9% YoY) as reported in FQ1'24.The Consensus Forward EstimatesTikr TerminalPerhaps this is also why the consensus have raised their forward estimates, with SE expected to generate an accelerated top/ bottom line expansion at a CAGR of +14.3%/ +89.8% through FY2026.This is compared to the previous estimates of +8.6%/ +27.6% and the historical top-line growth at +69.4% between FY2017 and FY2023, respectively.At the same time, the consensus continue to project robust Free Cash Flow generation moving forward, implying the SE management's ability to opportunistically invest in its growth while addressing the $168.41M of its debts due in 2024, $1.17B in 2025, and $1.55B in 2026.SE 2Y Stock PriceTrading ViewFor now, market reactions appear to be optimistic, with SE rapidly rallying while trading above its 50/ 100/ 200 day moving averages.SE ValuationsSeeking AlphaAt the same time, given the accelerated top/ bottom line growth prospects, SE appears to be reasonably valued at FWD EV/ EBITDA of 26.94x and FWD P/E of 37.84x, higher than the previous article at 23.35x/ 33.03x and the 1Y mean at 21.49x/ 38.14x, respectively.SE does not appear to be expensive compared to its diversified e-commerce and fintech peers, such as Amazon (AMZN) at 14.64x/ 41.11x and MercadoLibre (MELI) at 26.51x/ 49.85x, respectively, with the profitable growth further underscoring its viable investment thesis.With SE currently reporting lumpy adj EPS profitability, we will be referring to its adj EBITDA generation instead. Based on the LTM adj EBITDA of $1.09B (+187.9% sequentially) and the 598.69M of shares outstanding, we are looking at an adj EBITDA generation of $1.82 per share.Combined with the EV/ EBITDA valuation of 26.94x, it appears that the stock is trading at a notable premium of +45.7% compared to our fair value estimates of $49.Despite so, based on a similar calculation method using the consensus FY2026 adj EBITDA estimates of $2.75B and consequently, adj EBITDA per share of $4.59 then (expanding at an impressive CAGR of +36.1%), there appears to be an excellent upside potential of +73% to our long-term price target of $123.60.So, Is SE Stock A Buy, Sell, or Hold?As a result of the attractive risk reward ratio, we are cautiously rerating the SE stock as a Buy. With the stock already breaking out of its previous resistance levels of $67s, interested investors may want to observe its movement before adding according to their dollar cost average and risk appetite.It goes without saying that SE still faces intense e-commerce competition in the Southeast Asian market from multiple deep pocketed players, including GoTo/ TikTok and Alibaba's (BABA) Lazada, along with new players such as Temu and Shein.This also means that SE is quite likely to increase its investments/ marketing efforts into Shopee, potentially eroding its profit margins as observed in the elevated sales and marketing expenses at $769.63M (-20.4% QoQ/ +92.3% YoY) in FQ1'24.At the same time, the management continues to ramp up Shopee's content ecosystem, while sustaining its live streaming efforts and improving its logistics management, in an effort to boost the stickiness and experience of its consumer base.As a result, investors may want to temper their near-term expectations, with the FY2024 positive adj EBITDA margins potentially being underwhelming and FY2025 likely to being forth improved numbers.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":12,"commentSize":2,"repostSize":1,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false}}