SEA Today SE SEA $79.68 +0.39 (+0.49%) 52-Week Range $34.35 ▼ $79.93 P/E Ratio 1,593.60 Price Target $77.29 Add to Watchlist Singapore-based e-commerce, gaming, and financial services company Sea Limited NYSE: SE added to its ongoing stock rally following an earnings beat on Tuesday, with shares almost doubling in the last year heading into the end of the week. All three of the firm's major businesses experienced sales growth and strong profitability, though the cost of revenue remains a factor impacting ne ...

Investment Rating - The investment rating for the company is "Outperform" [2][4][10] Core Insights - The company's revenue for Q2 2024 reached $3.8 billion, representing a year-on-year growth of 23%, primarily driven by the e-commerce and digital finance sectors, partially offset by a decline in gaming revenue [1][5] - The adjusted EBITDA margins for e-commerce, gaming, and digital finance in Q2 2024 were -0.3%, 70%, and 32% respectively, compared to 7%, 45%, and 32% in the same period last year [1][5] - E-commerce revenue grew by 34% year-on-year to $2.8 billion, with a significant improvement in core market growth at 41% [1][7] - The gaming segment saw a revenue decline of 18% to $440 million, but adjusted EBITDA increased by 26% to $300 million, driven by strong performance from the game Free Fire [1][8] - Digital finance revenue grew by 21% year-on-year to $520 million, with an adjusted EBITDA margin of 32% [1][9] Summary by Sections E-commerce Business - The e-commerce segment's revenue was $2.8 billion, with a year-on-year increase of 34% and a gross merchandise value (GMV) growth of 29% [1][7] - The adjusted EBITDA for e-commerce was -$9 million, indicating a continued reduction in losses [1][7] - The company raised its full-year GMV growth guidance to approximately 25% [7] Gaming Business - Gaming revenue decreased to $440 million, a decline of 18% year-on-year, while the gaming gross revenue increased by approximately 21% to $540 million [1][8] - The number of active users reached 650 million, a 19% increase year-on-year, with paying users increasing by 22% to approximately 52.5 million [1][8] Digital Finance - Digital finance revenue was $520 million, reflecting a 21% year-on-year growth, primarily driven by credit services [1][9] - The adjusted EBITDA for this segment was $170 million, maintaining a profit margin of 32% [1][9]

Core Viewpoint - Sea Limited has reported mixed Q2 earnings, resulting in a 12% increase in stock price, with a year-to-date increase of 89%, indicating a shift in investor sentiment towards bullishness on the company [2][29][30] Financial Performance - Sea reported record revenue of $3.8 billion in Q2, a 23% year-over-year increase, surpassing analyst estimates by nearly $90 million [4] - The company achieved a net income of $80 million in Q2, representing a 2% net margin, marking a return to profitability after three consecutive quarters of losses [12] - Adjusted EBITDA was $448 million, reflecting a 12% margin, with Garena achieving a 70% margin, while Shopee remained near breakeven [12][13] Segment Performance - Shopee generated $2.8 billion in revenue, up 34% year-over-year, driven by a gross merchandise value (GMV) of $23.3 billion, which increased by 29% year-over-year [7] - SeaMoney reported $519 million in revenue for Q2, a 21% year-over-year increase, with significant growth in its consumer and SME credit business [9][10] - Garena's bookings grew 21% year-over-year to $537 million, primarily due to the success of the Free Fire game, which had over 100 million daily active users [11] Market Position and Strategy - Sea maintains a strong competitive position in Southeast Asia, with Shopee holding a significant market share and superior service quality [7][8] - Management has raised the 2024 Shopee GMV growth guidance to the mid-20% range, indicating expectations for continued acceleration in growth [11] - The company is focusing on improving its advertising take rate, which is currently below industry averages, presenting an opportunity for increased monetization [17] Financial Health - Sea has a net cash position of approximately $1.8 billion, with operating cash flow of $618 million in Q2, representing a 16% margin [19][20] - Free cash flow for Q2 was $554 million, indicating strong financial resilience and the ability to capitalize on growth opportunities [19] Valuation - Despite recent stock price increases, Sea is still trading at low valuations of 3.0x revenue, significantly below pre-COVID levels [21][24] - Analysts are upgrading the stock with a price target of $82, while a conservative base-case price target of $119 suggests a potential upside of 54% from the current price of $77 [24][26]

Investment Rating - The report maintains a "Buy" rating for Sea (SE.US) and raises the target price to $87, reflecting strong growth across all business segments [3][5]. Core Insights - Sea's Q2 2024 performance exceeded market expectations, with revenue of $3.81 billion, a year-on-year increase of 23.0%, and adjusted EBITDA of $450 million, surpassing market forecasts by 12.9% [2]. - The e-commerce segment showed robust growth, with revenue of $2.82 billion, up 33.7% year-on-year, and a GMV increase of 29.1% to $23.3 billion [2]. - Digital financial services also demonstrated stable growth, with revenue of $520 million, a 21.4% increase year-on-year, driven by consumer and SME lending [2]. Financial Performance Summary - For FY24E, the projected revenue is $15.646 billion, with an adjusted net profit of $1.114 billion, reflecting a significant recovery from previous losses [4][6]. - The adjusted EBITDA for the e-commerce segment is expected to turn positive in Q3 2024, with an annual GMV growth rate projected at around 25% [2][3]. - The digital entertainment segment reported a revenue of $440 million, with a notable recovery in game revenue driven by the strong performance of Free Fire [2][4]. Market Position and Outlook - The competitive landscape in Southeast Asia's e-commerce market remains stable, with improving monetization rates and a forecasted positive EBITDA for the e-commerce business in the upcoming quarter [2][3]. - The report anticipates continued double-digit growth in game revenue for the second half of the year, supported by ongoing content updates for Free Fire [2][3].

BofA Securities analyst Sachin Salgaonkar reiterated the Buy rating on Sea Limited SE, raising the price objective to $84 from $77. Yesterday, the company reported fiscal second-quarter revenue growth of 23.0% year-on-year to $3.81 billion, beating the analyst consensus estimate of $3.72 billion. Following the results, the analyst revised the FY24/25 EPS estimates and adjusted the target multiples for gaming to 6.5X FY25E EV/EBITDA, up from 5.5X. The analyst notes that the company is well-positioned to bene ...

Core Insights - Sea Limited reported earnings of 46 cents per share in Q2 2024, missing the Zacks Consensus Estimate by 22.03%, and down from 83 cents in the same quarter last year [1] - Revenues reached $3.91 billion, a 29.9% year-over-year increase, surpassing the Zacks Consensus Estimate by 4.73% [1] Top-Line Details - Digital entertainment revenues were $435.6 million, a decrease of 17.7% year-over-year [2] - Garena saw a 20% year-over-year increase in bookings, with Free Fire maintaining over 100 million Daily Active Users [2] - Quarterly active users reached 648 million, up 19% year-over-year [2] User Metrics - Paying users increased to 52.5 million, a 21.7% year-over-year growth, with a paying user ratio of 8.1% compared to 7.9% last year [3] - Average bookings per user were 83 cents, up from 81 cents in the previous year [3] - Total bookings for Q2 2024 were $536.8 million, a 21.1% increase year-over-year [3] E-commerce Performance - E-commerce and other services revenues totaled $3 billion, reflecting a 30.4% year-over-year increase [3] - Shopee's gross orders rose by 40% and GMV grew by 29% [4] - Sales of goods increased by 40.5% year-over-year to $342.5 million [4] Digital Financial Services - Digital financial services revenues increased by 21.4% year-over-year to $519.3 million [4] - The loan book reached $3.5 billion, up nearly 40% year-over-year, with active users for consumer and SME loans growing by almost 60% [5] Operating Details - Gross profit increased by 9.2% year-over-year to $1.58 billion [6] - Adjusted EBITDA was $448.5 million, down from $510 million in the previous year [6] - Digital Entertainment's adjusted EBITDA rose by 26.5% year-over-year to $302.8 million [6] - E-commerce adjusted EBITDA declined by $9.2 million compared to a profit of $150.3 million in the year-ago quarter [6] - Digital Financial Services adjusted EBITDA was $165 million, a 20.2% year-over-year increase [7] Balance Sheet - As of June 30, 2024, Sea Limited had cash and cash equivalents of $2.64 billion, up from $2.46 billion as of March 31, 2024 [7] Stock Performance - Sea Limited's shares have surged 83.8% year-to-date, outperforming the Zacks Computer & Technology sector's rise of 15.2% [8]

Core Viewpoint - Sea Limited's recent earnings report indicates a potential return to profitable growth, suggesting a positive outlook for the company's financial performance moving forward [1] Financial Performance - The earnings report highlights significant improvements in revenue and profitability metrics, signaling a recovery in Sea Limited's business operations [1] Market Reaction - Following the earnings announcement, Sea Limited's stock price experienced notable movements, reflecting investor sentiment regarding the company's growth trajectory [1]

Key Takeaways A 40% jump in sales for Singapore's Shopee helped its parent Sea Limited post strong earnings. CEO Forrest Li said Shopee will become adjusted EBITDA-positive starting in the third quarter. Sea's gaming and financial services businesses also saw double-digit growth. The company's U.S.-traded shares jumped 12% on Tuesday, boosting its year-to-date gain to 85%. Shares of Sea Limited (SE), the Singapore tech conglomerate that runs online shopping website Shopee, soared Tuesday after the company r ...

Earnings showed growth and increasing profitability across all three of the company's segments. Shares of Sea Limited (SE 11.66%) were rallying on Tuesday, up 11.5% as of 2:35 p.m. ET. The Southeast Asian e-commerce, fintech, and gaming company reported earnings today that were somewhat mixed relative to analyst estimates, but it showed continued improvement across all three of its segments. Sea's comeback is underway Sea Limited was one of the darlings of the pandemic era, reaching a high of $372 per share ...

Financial Data and Key Metrics - Total GAAP revenue increased 23% YoY to $3.8 billion in Q2 2024, driven by e-commerce GMV growth and Digital Financial Services (DFS) business growth [15] - Adjusted EBITDA was $448 million in Q2 2024, compared to $510 million in Q2 2023 [15] - E-commerce adjusted EBITDA improved QoQ, with losses narrowing to $9 million in Q2 2024 from $22 million in Q1 2024 [15] - DFS GAAP revenue grew 21% YoY to $519 million, with adjusted EBITDA up 20% YoY to $165 million [17] - Digital Entertainment bookings grew 21% YoY to $537 million, with adjusted EBITDA of $303 million [17] Business Line Performance E-commerce (Shopee) - Shopee's gross orders grew 40% YoY, and GMV increased 29% YoY [15] - Core marketplace revenue (transaction-based fees and advertising) grew 41% YoY to $1.8 billion [15] - Value-added services revenue (logistics) grew 16% YoY to $0.7 billion [16] - Shopee's ad take rate is lower than the industry average, but the number of sellers paying for ads increased by over 20% YoY [6] - Live Ads launched in Asian markets, with 25% of active streamers in Indonesia paying for Live Ads in June [7] - SPX Express improved delivery speed, with over 70% of orders delivered within three days, and cost per order declined 8% YoY [8] Digital Financial Services (SeaMoney) - Consumer and SME credit business remains the primary driver of SeaMoney's revenue and profit growth [9] - Loan book size reached $3.5 billion at the end of June, up almost 40% YoY [11] - Non-performing loans (NPL) metric improved slightly to 1.3% at the end of Q2 [17] - Over 4 million first-time borrowers registered in Q2, more than double compared to a year ago [10] Digital Entertainment (Garena) - Free Fire contributed to over 20% YoY growth in bookings, with more than 100 million daily active players in Q2 [12] - Free Fire was the most downloaded mobile game globally in Q2, according to Sensor Tower [12] - Need for Speed: Mobile to be launched in Taiwan, Hong Kong, and Macau later in 2024 [13] Market Performance - In Asia, e-commerce adjusted EBITDA was $4 million in Q2 2024, compared to $204 million in Q2 2023 [16] - In Brazil, unit economics improved, with a positive contribution margin per order of $0.09 in Q2 2024, compared to a loss of $0.24 in Q2 2023 [16] Strategic Direction and Industry Competition - Shopee's operational priorities include enhancing price competitiveness, improving service quality, and strengthening the content ecosystem [5] - The company expects Shopee to become adjusted EBITDA positive from Q3 2024 and revised full-year GMV growth guidance to mid-20s [5] - The company sees a more stable competitive environment in Southeast Asia, with industry-wide take rate increases [19] - The company is focused on deepening credit product penetration both on and off Shopee, with new use cases like SPayLater loans for mobile phone sales in Indonesia [10] Management Commentary on Operating Environment and Future Outlook - Retail and consumer spending trends in Southeast Asia remain healthy, supporting e-commerce growth [4] - The company is optimistic about the potential for further ad take rate improvements and expects to see benefits in the coming quarters [22] - Free Fire is seen as an evergreen franchise, with strong momentum expected to continue in H2 2024 [34] - The company is cautious about competition from cross-border e-commerce players like Temu but believes its pricing advantage and domestic seller base provide a strong competitive edge [37] Other Important Information - Two new Independent Directors joined the Board: Dr. Silvio Savarese (AI expert) and Ms. Jessica Tan (financial services leader) [14] - Tony Hou will step down from the Board but continue as CFO [14] Q&A Session Summary Question 1: Competitive Landscape and Margin Expectations for Shopee [19] - The company sees a more stable competitive environment and expects Shopee to achieve 2-3% EBITDA margin in the long term [19] - Near-term focus is on profitability and market growth, with medium-term expectations for further industry rationalization [19] Question 2: Ad Take Rate and Live Streaming Unit Economics [21] - Opportunities exist to further increase ad take rates, particularly through improved ad products and algorithms [22] - Live streaming unit economics are improving, with some markets already profitable [22] Question 3: Brazil Market and EBITDA Guidance [24] - Brazil's contribution margin turned positive, driven by reduced shipping costs and improved user experience [25] - Adjusted EBITDA positive guidance refers to Q3 standalone EBITDA [25] Question 4: DFS Growth and Logistics Optimization [27] - DFS is expanding both online and offline credit use cases, with partnerships in Indonesia for SPayLater loans [28] - SPX Express is optimizing operations through scale, automation, and technology improvements [28] Question 5: Ad Take Rate Timeline and Gaming Momentum [31] - Ad take rate improvements are expected in the coming quarters, not years [32] - Free Fire's momentum is strong, with double-digit growth expected for 2024 [34] Question 6: Competition in Taiwan and Indonesia [40] - In Taiwan, the company is focusing on delivery speed and seller efficiency to maintain competitiveness [42] - In Indonesia, the company is less concerned about short-term subsidy fluctuations and focuses on medium-term trends [42] Question 7: DFS Margin Trends and Revenue Mix [43] - DFS margins are stable, with newer markets showing faster growth [44] - Long-term revenue mix may see a higher contribution from DFS due to GAAP revenue treatment for gaming [45] Question 8: Commission Take Rate and Free Fire Booking Growth [46] - Commission take rates are expected to remain below global peers, but ad take rates will drive overall improvements [47] - Free Fire booking growth remains strong, but the company is cautious about updating guidance [48]