Sea Limited's Shipping Subsidies Boost GMV: Is Growth Sustainable?

Core Insights - Sea Limited's (SE) reliance on shipping subsidies has significantly contributed to Shopee's GMV growth, which increased by over 28% year over year to $32.2 billion in Q3 2025, indicating a strong market position in Southeast Asia, Taiwan, and Brazil [1][10] Financial Performance - Despite the impressive GMV growth, the cost of services surged by 38.8% due to increased logistics spending, leading to a 5.7% decline in value-added services revenues [2][10] - Shopee's adjusted EBITDA margin fell to 0.6% of GMV, highlighting ongoing profitability pressures from shipping and fulfillment costs [3][10] Competitive Landscape - Shopee faces intense competition from Alibaba and MercadoLibre, with Alibaba leveraging its logistics and technology ecosystem to maintain a strong market presence [5][6] - MercadoLibre reported a GMV of $16.5 billion, up 28% year over year, showcasing its robust position in Brazil and Latin America [7] Future Outlook - Sea Limited is working to regain cost control by expanding its in-house logistics arm, SPX Express, which is expected to handle most deliveries in key regions [4] - The Zacks Consensus Estimate projects revenue growth of 37.43% in 2025 and 26.21% in 2026, indicating potential for continued top-line growth [4] Valuation Metrics - Sea Limited's stock is currently trading at a forward price-to-earnings ratio of 21.38, which is lower than the sector average of 27.76 [12] - The earnings estimates for 2025 and 2026 are $3.60 and $5.64 per share, respectively, reflecting year-over-year growth of 114.29% and 56.67% [15]