Sea Limited: Firing On All Cylinders

Core Viewpoint - Sea's Q2 2024 results exceeded expectations, with a 23% year-over-year revenue growth and a 12% EBITDA margin, indicating a strong recovery and growth momentum across its business segments [3][4][16] Financial Performance - Total revenue for Q2 2024 reached $3.2 billion, surpassing the consensus estimate of $3.1 billion, with adjusted EBITDA expected to increase by 65% year-over-year to $1.95 billion for the full year [4][16] - The e-commerce division, Shopee, reported a 32% revenue increase year-over-year, supported by a 24.5% growth in Gross Merchandise Value (GMV) [6][16] - The digital financial services segment saw a 39% increase in its gross loan book to $3.5 billion, with active users growing by 58% to 21 million [10][11][16] E-commerce Segment - Shopee is projected to achieve EBITDA breakeven by Q3 2024, driven by operational efficiencies and international expansion [6][16] - The company has raised its GMV growth guidance to the mid-20% range for 2024, reflecting confidence in sustained growth [6][16] - Shopee's operational efficiency is highlighted by a 70% on-time delivery rate in Asia and an 8% reduction in costs per order [7][16] Gaming Segment - Garena's performance was mixed, with a 21% increase in active paying users to 53 million, despite a decrease in time spent playing its flagship game, Free Fire [8][16] - The company plans to leverage AI-based tools to enhance game development efficiency [8][16] Financial Services Segment - The digital financial services segment's growth is driven by strong lending activity, both on and off the platform [10][11] - The segment's performance indicates improving commercial dynamics, with significant growth in both the loan book and active customer base [10][11][16] Valuation Update - Following the strong earnings momentum, the fair implied target price for Sea's stock is updated to approximately $62, reflecting a doubling from the previous estimate of $27 [13][16] - The updated EPS estimates for 2023, 2025, and 2026 are $1.9, $3.3, and $4.4 respectively, aligning closely with analyst consensus [13][16]