Sea Limited (SE) on Q1 2021 Results - Earnings Call Transcript
Operator: Good morning and good evening. Welcome to the Sea Limited's First Quarter 2021 Results Conference Call. All participants will be in listen-only mode. After today's presentation there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Ms. Min Ju Song. Please go ahead. Min Ju Song: Hello, everyone, and welcome to Sea's 2021 first quarter earnings conference call. I am Min Ju Song from Sea's Group Chief Corporate Officer's Office. Before we continue, I would like to remind you that we may make forward-looking statements, which are inherently subject to risks and uncertainties and may not be realized in the future for various reasons as stated in our press release. Forrest Li: Thank you, Minju. Hello, everyone, and thank you as always for joining today's call. We are pleased to start 2021 on a strong note with our results for the first quarter showing continued high growth across all our businesses. Even with the revenue recovery in offline activities in our region since the second half of 2020, our strong performance in terms of users' growth and engagement shows that digital adoption is still rising healthily as the communities we serve continue to embrace the benefits of online lifestyle. At the group level, for the first quarter of 2021, we're happy to report GAAP revenue of $1.8 billion, which represents 147% year-on-year growth. We've recorded particularly strong growth in gross profits, which reached $645.4 million, up 212% year on year, while adjusted EBITDA was $88.1 million, compared to a loss of $69.9 million a year ago. This strong performance on both the top and the bottom line once again demonstrates Sea's ability to capture the high growth potential of the industry and the regions we operate in while deploying capital and the resources effectively and efficiently across our businesses. Before we discuss our business performance in detail, it is important to note that many of the communities, consumers, and the small businesses we serve continue to face significant challenges as a result of the ongoing impact of the pandemic, including recent increases in cases in some countries. At Sea, we are committed to play our part in helping our communities navigate these ongoing challenges. This includes support to address the most pressing near term needs of our communities as well as our sustained focus on helping more people to benefit from the growth of this whole economy. Tony Hou: Thank you, Forrest and thanks to everyone for joining the call. We have included detailed financial tables, together with the corresponding management analysis in today's press release and Forrest has discussed some of our financial highlights. So I will focus my comments on the other relevant metrics. For Sea overall, total GAAP revenue increased 147% year on year to $1.8 billion. This was mainly driven by strong performance in our e-commerce business as we continue to grow our tools to better serve our users' needs, as well as the growth of our digital entertainment business, especially our self-developed game Free Fire. Digital entertainment bookings grew 117% year on year to $1.1 billion. GAAP revenue was up 111% year on year to $781.3 million. The growth was primarily driven by the increase of our active user base, and dividend paying user confusion as we continue to engage the community through new content, and partnerships roll out and esports events. Digital entertainment adjusted EBITDA was $717.2 million. This represents year-on-year growth of 140%. This was mainly due to the strong top line growth, and an increased share of our self-developed game among our total bookings. On e-commerce, our first quarter net revenue of $922.3 million included GAAP marketplace revenue of $715.9 million, up to 285% year-on-year and GAAP product revenue was $406.4 million, up 167% year-on-year. The strong results demonstrated the deepening penetration of e-commerce and our ability to capture these accelerated growth opportunities as we continuously enhance our offerings to create greater value for our paying users. E-commerce adjusted EBITDA loss was $404.9 million. As we continued our investments to fully capture opportunities in our markets. We remain committed to efficiently investing in and growing the ecosystem to serve our users better. Digital financial services GAAP revenue was $51.3 million, an increase of 396% year-on-year from $10.2 million in the first quarter of 2020. The growth was primarily due to increasing traction as we continued to expand our suite of service offerings. Adjusted EBITDA loss was $153.1 million, compared to a loss of $93.1 million in the same period of 2020. This was primarily due to our continued efforts to drive mobile wallet adoption. Returning to our consolidated numbers, we recognized a net non-operating loss of $23.3 million in the first quarter of 2021 compared to a net non-operating income of $11.2 million in the first quarter of 2020. Our non-operating loss in the first quarter of 2021 was apparently due to increased interest expense on convertible notes. We had a net income tax expense of $51 million in the first quarter of 2021, which was primarily due to corporate income tax and withholding tax recognizing our digital and entertainment business. As a result, net loss, excluding share based compensation was $320 million in the first quarter of 2021, as compared to $239.5 million for the same period in 2020. With that, let me turn the call to Yanjun. Yanjun Wang: Thank you, Forrest and Tony. We are now ready to open the call for questions. Operator? Operator: Our first question comes from Thomas Chong from Jefferies. Please go ahead. Hello Thomas, is your line muted? Thomas Chong: Yanjun Wang: Thanks, Thomas. Regarding your question, sorry your line isn't super clear. I understand your question as regarding the lifecycle of Free Fire, as well as the growth drivers of the users and RPTU and whether the growth is coming from LatAm region, is this is correct? I'll answer this question first. Regarding the Free Fire, I think, as we can observe from our disclosure of quarterly active user, for a paying user, and bookings, as well as the bottom line was adjusted EBITDA, which is largely also attributable to Free Fire being a global game and growing at a very healthy rate globally, we see it as still at its early stage of life cycle. And, in fact, we see it increasingly as a platform and a major and a major IP franchise. We are focusing on continuing to grow our user base. The growth driver of the growth comes from both, Southeast Asia, LatAm, as well as India and the rest of the world. And that's the same for both the user base as well as paying user based. So we're still at an early stage of driving growth on the user base as well paying user base for this game, and developing it into a premium social platform where people not only have to play the core gameplay, but also enjoy other modes, hang out, listen to music, socialize, the time spent in the game continue to be very high there two to three hours per daily active user. And as we discussed in the earlier comments that we observed encouraging trends on the cohort analysis as well, where the older cohort, who had been with us since the early days of this game, have shown stronger trends in time play as well as paying ratio. And we also see younger cohorts coming in more recently, showing even faster growth of per user ratio as well as stickiness. And there's also as we mentioned, positive feedback loop between paying user as well as and stickiness of the game, but user pay and pay more, they tend to play the game more and be with the game for longer. We are also being focused on building our ecosystem on inputs to communities, as well as collaborations with third party IP. As we mentioned before, we have collaborated with for example, One-Punch Man which was a very successful campaign to promote further engagement in our game. So I think this is a very much a broad based user growth, as well as pace of growth. And we'll continue to focus on growing this game globally. Operator: The next question comes from Piyush Mubayi from Goldman Sachs. Please go ahead. Piyush Mubayi: Thank you for joining Yanjun, and whatever could be ecommerce business, I was hoping you could shed some light on where you are in Brazil. And also help us to understand the drivers of the improvement that we saw in the take rates and related to e-commerce in better understanding the spend that is taking place, would you be able to tell us or give us a feel for how much the investment is it's the drag on the EBITDA for the e-commerce side at this stage in the 1Q period? Thank you. Yanjun Wang: Thanks, Piysuh. As we mentioned earlier, we've seen continuously positive user reception in Brazil and we'll continue to invest to enhance our offerings to our sellers and growing user base there. At this stage is still very early for us. And we'll continue to observe the trends locally and focus on efficiently investments there. Piyush Mubayi: Could you shed some light on day-to-day with a drag on the overall EBITDA because of investments in outside this region as far as e-commerce is concerned? Yanjun Wang: Again, it's still very early stage. I think it's still too early to talk about the market separately. Overall, I think the contribution in terms of the margin we're seeing from the e-commerce perspective is still very positive. Our EBITDA loss per order continued to fall and in terms of top line bullish still at 250% which is very strong on all fronts. So I think that still very early stage for Brazil for us to discuss it even in the supermarket. Operator: The next question comes from Alicia Yap from Citigroup. Please go ahead. Alicia Yap: Hi, good evening management. Thanks for taking my questions. Congratulations on the solid results. I have two quick questions. Number one, just wondering if management can share the conditions in India, given the Free Fire attractions there, given the lockdown, do you actually see the time spend are increasing or are you actually seeing some negative impact because of the yield nurse and the instability, so any color from the game performance in India? And then second question is on the food delivery business, if you can share your plans and ambitions, will that be more complimentary or is it a need to win bases that you wanted to challenge the market eager? Thank you. Yanjun Wang: Thank you, Alicia. Regarding India, we also observed the local situation. Hopefully, India has as we mentioned, earnings continue to be a top grossing market and where are being performed very shortly, time spent per user continue to be very high. We see rising paying user ratio there. We see it as a highly promising market, and will continue to contribute meaningfully to our growth in a game with a very long runway and will focus on promoting our game and user engagement in India. And in terms of food delivery, we see it as a category, Shopee. And so we see very strong user acceptance naturally. And similar to how we were able to grow these other categories on Shopee, through strong execution by business model and user engagements and as we mentioned before, for food, we see it as a more of a complimentary to our other e-commerce offerings and we do become a market leader naturally, like what happened in Vietnam. We're happy to see that, but as we see it as focus on healthy growth and sustainable growth as part of the overall e-commerce ecosystem. Operator: Next question comes from Ranjan Sharma from JPMorgan. Please go ahead. Ranjan Sharma: Hi, it's Ranjan Sharma from JPMorgan. Thank you for the presentation. Two questions from my side. Firstly, on Shopee and LatAm you have seen success in driving adoption in Brazil, you are in Mexico, if you could also show how you see the rest of Latin America as an opportunity for e-commerce? And secondly, on food delivery, you had Vietnam, you had Indonesia. How should we think about Shopee food expanding throughout Asia? Thank you. Yanjun Wang: In terms of our LatAm market, again, even Brazil is very, very early stage for us, not to mention the others. We don't have much update at this point, that any development, then we will update the market. The same thing for food. We have been doing food in Vietnam and has been the market leader there. And Indonesia, we very recently rolled out first in Jakarta and now gradually in other expanding to other markets over time. But we have not announced any plans in any other markets. If there's any update you will also get a market note. Operator: The next question comes from John Blackledge from Cowen. Please go ahead. John Blackledge: Great, thanks. Two questions. First could you just give us an update on Shopee's competitive positioning in the core markets in greater Southeast Asia? And then just as kind of has been asked and I'm going to ask again. Sales and marketing spend was higher than expected. Could you just provide some further color on the sales and marketing spend, and was Brazil expansion a key driver of the sales and marketing spend? Thank you. Yanjun Wang: Thank you. In terms of our competitive landscape, continued to improve for us as we continue to extend our market leadership in the markets across all fronts. And as evidenced by our improving top line GMV order growth, at a very high rate of more than 150% in Southeast Asia, plus Taiwan, and also our increasing take rate over time, and monetization. In terms of sales and marketing spends, I think our top line growth also probably in a way exceeded the consensus. So just marketing says percentage of GMV actually dropped quarter-on-quarter. So I think we'll continue to observe the trends. Now, it's very important to note that, this is a really a managed outcome for us as we look at all the opportunities as a company that we have. This is actually the 11th quarter that we've shown a triple digit growth as a top line. And as a company of our scale and size and speed of growth might not be many other large cap internet companies that have shown this level of sustained very high growth. And our growth is carefully managed, results through prudent and efficient spending, and investment in the long-term development of the business model, And we are in high growth regions, whereby the penetration of digital economy is still very low. So the long way is very high. The competition landscape is not a kind of red ocean, zero sum game situation. Instead, we actually continue to see our market leadership extending as we, while we are bigger we're also growing, we believe, at a faster rate than many other players. So that actually bodes very well, while those opportunities and we want to continue to invest in the long-term business model, which we believe can maximize profitability down the road for us and our shareholders in the long run. Operator: The next question comes from Josh Levin from Autonomous Research. Please go ahead. Josh Levin: Hi, good afternoon. I have two questions. First of all, in the e-com business, as you think about the future, how are you thinking about the mix of in-house versus 3P logistics? And then second, what are the implications of Gojek and Tokopedia merging for your business? And do you see any disadvantage to not having a ride hailing business? Thank you. Yanjun Wang: In terms of logistics, our approach has been quite consistent, where we primarily work with third party logistics services providers in our region. And we've been also focused on investing in growth with us, and we further, more deeply integrated with them, help them to improve their efficiency and quality of services to our users. As we continue to see delivery time being shortened, efficiency in foods and costs lowered over time. Our own express delivery services are complementary to the third party logistics services in the markets. And of course, we will have continue to have the first party capabilities to make sure our users are well served, especially during peak seasons or sometimes during the lockdown, when there could be constraints in capacity. In terms of the implications of the merger, first, we'd like to congratulate our friends on their successful merger. And we think that, as I've mentioned, it's a huge opportunity in our region. There's a very long runway, and we should all collectively focus on expanding the pie and growing the digital economy, now the region and invest in the long run to serve our users and communities better. In terms of the disadvantage of any, not having any particular business, we don't really see that. We fixed that. So we are very fortunate to have three of the largest consumer internet opportunities in the high both regions that we are aim and we are able to manage it across so many complex and different markets. And with the three growth engines, and also especially high, profitable gaming business, the fund helped to actually fund our growth in e-commerce and digital financial services. We think we stand in the best opportunity to -- in the best position to recapitalize opportunities to build the largest consumer internet ecosystem in this region. And we'll continue to focus on executing on our core businesses, as well as building those ecosystems. Operator: The next question comes from Piyush Choudhary from HSBC. Please go ahead. Piyush Choudhary: Good evening. Thanks a lot, and congratulations for solid results. Two questions. Firstly, for Free Fire, could you share your thoughts on where do you see opportunity to expand the user base further and where time spent per user can potentially expand? Secondly, on your digital financial services strategy, beyond wallet, can you talk about, you know, your consumer lending and merchant lending products? How has been the response to buy now, pay later and merchant lending and outlook for regional expansion? Thank you. Yanjun Wang: Yes. I think we continue to see opportunity to expand our user base in -- you know, across all markets, in Southeast Asia, LatAm, as well as, of course, India and the rest of the world. And in fact, there has been a consistent trend historically. We see the penetration rate is still deepening over time so as pays of penetration rate. And as we continue to roll out more IT and engagement and different game mode and engage out with our users online and offline through different activities, community engagement, we think there are definitely opportunities to further grow the user base, as well as user time spent on the platform. We have seen user time spent for some of the top users, who can spend multiple hours a day on the platform, and we are focused on, of course, more of a broad-based time spent as opposed to top time spent by a small group of users. Of course, with, you know, 100 million daily active user, we're talking about a much larger community over time. So, our focus is to continue to promote a massive-based online platform and an online community and provide them with content and opportunities for socializing engagement, trial different modes of games, trial different characters, avatars, or having different ways of playing. For example, we recently are launching, you know, a more of a mystery-solving game mode, something like Among Us with pets that players own in the game. So we'll continue to innovate to bring more content to them. And that's what we focus on in growing the user base, as well as time spent per user and engagement in the game. In terms of the program, we see it as an integral part of our SeaMoney services to our listed Shopee users. And as we continue to improve our model and understand our user behavior better, we might gradually roll out the program across more -- a larger user base, as well as across more markets, but we'll continue to focus on, you know, efficiency, high-quality lending, and management of user experience, in that respect. I think this is a program that facilitates wallet usage, as well as further facilitate growth of our e-commerce platform, at the same time, allow us to provide better services and have better models on top of which we can build other digital financial services, such as intra tech and wealth management technology services. Again, we'll continue to focus on, you know, using technology to power delivery of -- financial services to underserved communities, and we are focused on collaborating with other financial institutions in growing the pie together collectively. Operator: The next question comes from Varun Ahuja from Credit Suisse. Please go ahead. Varun Ahuja: Yes, hi, good evening, management, and thanks for the opportunity. Three questions. First, on the e-commerce side, I think 1Q is seasonally supposed relatively weaker given it's coming out of a strong 4Q. But this quarter, it's again a 6% quarter-on-quarter growth in GMV, so a strong growth. Can you just give some colors in terms of which segments and which countries it's doing well? And obviously, you've not given the number of orders by Indonesia. If you can give some color on that front, that will be helpful. On the gaming side, can you provide a little bit more color on have you launched Free Fire MAX? And anything about the -- any game launches, any plan, anything color that will be helpful? And if you launched Free Fire MAX, any color how is it trending in the developed market? Thirdly, on the digital financial services side, if you can share how much of this $3.4 billion of TPV is related to the e-commerce, your platform versus how much are third party, any breakup? That would be helpful. Thank you. Yanjun Wang: Thank you, Varun. In terms of the e-commerce business, yes, it continued to experience hyper charged growth across all markets and categories. So, our category composition really hasn't shifted much. And we continue to see growth across all major categories. And same for the market -- different markets. In Indonesia, we mentioned that our year-on-year growth rate actually further accelerated. In fact, this is the highest year-on-year growth rate we've seen in recent times. And in terms of Free Fire MAX, we continue to improve on that -- the game and in terms of understanding our user preference and behavior. We've been testing it in controlled environment, in select market to work on the, you know, the dispersion. I think our goal is to have different offerings, for users with different preferences and have integrated and seamless user experience on our game. In terms of new game launched, High 5, I think we previously announced , which is a open world survival game, and we believe it will also offer a fresh content to communities in our, you know, game world. And then also, the Moonlight Blade, which is MMORPG game. And based on a more well-known IP in parts of Asia, I think these are some of the examples that, you know, we have mentioned in the -- in our pipeline. But again, as you know our practice, while we do have a lot pipeline of potential IP, we don't preannounce those in earnings. We really would like our game of community to hear from -- directly from our game in the -- first. And in terms of the TPV, most of it still related to Shopee, as well as our self-owned services. As I mentioned before, we believe the most efficient way of growing our SeaMoney business or, in particular, the e-wallet business, is through growing our own ecosystem of wee own use case, which also happened to be the largest and some of the highest quality online use cases that allow us to grow the wallet efficiently and on top of which, to have high-quality user analysis and understanding to be able to build comprehensive additional financial services on top of it. So, this will continue to be our strategy. Operator: Our next question comes from Pang Vitt from Goldman Sachs. Please go ahead. Pang Vittayaamnuaykoon: Hi. Thank you very much for the opportunity. Just two questions from me. Firstly, on Garena, can I understand why is the margin decline quarter-on-quarter, do you think that Free Fire continues to expand its base? And second question is related to COVID impact? We've seen a worsening in COVID situation around the world, in Singapore and Thailand, and also in India. How prepared at this time and if situation continues to worsen, what should we expect from master route of seller support program as we've seen last year? Thank you. Yanjun Wang: Thank you, Pang. In terms of the EBITDA margin, we mentioned before that we believe our EBITDA margin might fluctuate from time-to-time, but remain at a high rate compared to the industry average. So more related to the first quarter, as I mentioned, we have IP collaboration such as One-Punch Man, and this might also contribute to additional payouts, we need to make to the party IP owner, but overall we think it is very helpful in further engagement with our users, and in promoting our games to a broader base, and in promoting the paying user as well. So we will continue to focus on growing the user base and pay user base, and user engagements. We have proven our ability to commercialize any, whether it is self developed or third party IT incorporated in our being broadly across many markets. In terms of COVID impact, you're right that we have seen resurgence of cases and restart of some form of lockdown or restriction of social movements in our region, such as Taiwan, Singapore, Thailand, Vietnam, of course India also. We also see very large number of cases and for other countries like Indonesia, Malaysia, Philippines, we continue to see large number of cases. So I think we're still very much in the COVID situation and so we are well prepared, we believe to handle that, since early last year when this, the pandemic first hit, I think our team have shown resilience, and adaptability to be able to manage the strictest form of lockdown to deliver the well needed services to all communities and with specs in service levels, and we will continue to fulfill those services and demands with quality. I think we are also well prepared for any new surges in cases, and will continue to be vigilant. Any results of COVID the step up in digitalization we believe is here to stay and that has been evidenced in our numbers. Of course, if there are further lockdown and restrictions of movements we think there will be even greater need for our online services to reach broader communities, and we are ready to deliver that. Operator: Our next question is a follow up from Ranjan Sharma from JPMorgan. Please go ahead. Ranjan Sharma: Hi, thank you. Yes, can I just have a quick followup on Free Fire in the U.S., which seems to be a vast improvement and popularity in the U.S. If you can share any color what's driving this and this engagement means where it is, how do you feel about giving guidance for this year? Thank you. Yanjun Wang: Yeah. We continue to see a positive reception and growth of Free Fire in direct markets in North America, and we think it's a highly encouraging sign, and we'll continue to serve the users there. I think there are -- you know, not all Battle Royale games are the same. Each top hit game has its own appeal to its own audience. And I think our game differentiates itself in terms of the appeal to broad-based, not necessarily action-focused audience but with a lot of broad-based appeal with fantasy elements, social elements and various forms of engagement and game mode and user friendliness to broad-based communities across gender, age, and level experience with Battle Royale or action game in general. I think this helps in promoting our game to different types of audiences, and we'll -- they will, one way or the other, find us, and we see strong organic growth in, you know, game communities. And we'll continue to focus on reaching the right communities with our game and serving them well in the direct markets as well. In terms of gaming guidance, of course, we see very strong results this quarter. We'll continue to observe. And, you know, we need to update the guidance, we'll let people know. But at this point, we'll continue to observe the trends. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Min Ju Song for any closing remarks. Min Ju Song: Thank you all for joining today's call. We look forward to speaking to all of you again next quarter. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Citi Raises Sea Price Target on Strong Growth Outlook, Stock Gains 2%
Sea Ltd. (NYSE:SE) shares rose more than 2% intra-day today after Citi analysts increased their price target for the company to $113 from $90, reiterating a Buy rating based on promising growth expectations for the Southeast Asian tech giant. Sea is expected to report third-quarter 2024 results in mid-November, with significant advancements in its e-commerce and digital entertainment segments anticipated.
In its second-quarter report, Sea boosted its guidance for Shopee, its e-commerce platform, predicting full-year Gross Merchandise Value (GMV) growth in the mid-20% range year-over-year and an adjusted EBITDA turning positive in the third quarter. The analysts project Shopee’s third-quarter adjusted EBITDA to reach approximately $21 million, or 0.09% of GMV, bolstered by GMV and revenue growth rates of 21.8% and 34%, respectively, yielding a monetization rate of 12.2%.
Sea’s digital entertainment division is also expected to post strong results, with a projected 20% year-over-year increase in bookings, partly due to the residual effects of past promotional events. The analysts forecast that overall third-quarter performance will be solid, with potential slight upticks in e-commerce and digital financial services (DFS) revenue, as well as gains in games and DFS EBITDA.
Looking forward, the analysts see Sea maintaining its growth trajectory, supported by a favorable competitive environment and heightened seasonal demand in the fourth quarter.
JPMorgan Upgrades Sea Ltd. to Overweight After Q2 Earnings Report
JPMorgan analysts upgraded Sea Ltd. (NYSE:SE) to Overweight from Neutral, raising the price target to $90 from $66, following the company’s reported Q2 results yesterday. The analysts highlighted the potential for significant positive earnings revisions across all three of Sea's major business segments.
The analysts particularly expect substantial improvements in e-commerce profitability, driven by Sea's strong market position, efficient spending, and higher growth rates. JPMorgan increased the fiscal 2025 Shopee adjusted EBITDA forecast by approximately 50%, leading to a 15% boost in the 2025 Group adjusted EBITDA forecast, which is now about 35% higher than the consensus. The upgrade reflects confidence that continued positive earnings revisions will sustain Sea Ltd.'s strong market performance, with shares already up 85% year-to-date.
Sea Ltd. Reports Mixed Q2 Results, Shares Surge 10%
Sea Ltd. (NYSE:SE) reported mixed financial results for the fiscal Q2/24, leading to a 10% surge in its shares intra-day today. The consumer internet company posted earnings per share of $0.14, missing the analyst consensus of $0.17. However, revenue for the quarter exceeded expectations, reaching $3.81 billion compared to the projected $3.74 billion.
The company also reported stronger-than-expected adjusted EBITDA of $448.5 million, surpassing the anticipated $397.4 million. In its Digital Entertainment segment, adjusted EBITDA came in at $302.8 million, higher than the expected $270.2 million. The Digital Financial Services segment also outperformed, with an adjusted EBITDA of $164.7 million, above the estimate of $156.4 million.
Sea's Chairman and CEO, Forrest Li, highlighted the company's ongoing momentum, noting strong growth and increased profitability across all three of its business segments. Li pointed to the success of Garena, which saw more than 20% year-on-year growth in bookings, largely driven by the popular game Free Fire.
Looking ahead, Li stated that Shopee is on track to achieve adjusted EBITDA profitability in the third quarter. Additionally, the company has revised its guidance for Shopee’s full-year GMV growth in 2024, now expecting it to be in the mid-20% range.
Sea Limited (NYSE:SE) Reports Promising Q2 Financial Results
- Sea Limited's growth and increased profitability across all business sectors highlight its strong operational strategies and market adaptability.
- The company's digital entertainment segment, particularly through Garena, and its e-commerce platform, Shopee, continue to dominate their respective markets.
- Forrest Li's optimism for Shopee's future underscores the strategic initiatives and consumer acceptance driving the company's success.
Sea Limited (NYSE:SE), a leading global consumer internet company based in Singapore, recently shared its financial results for the second quarter ending June 30, 2024. The company, known for its major business segments including digital entertainment, e-commerce, and digital financial services, has shown a promising trajectory in its latest report. Forrest Li, the Chairman and CEO, expressed his contentment with the company's performance, emphasizing the sustained strong momentum from the first quarter into the second. This momentum is a testament to Sea Limited's robust operational strategies and its ability to adapt to market demands.
The growth and increased profitability across all of Sea's business sectors are particularly noteworthy. These sectors, each critical to the company's overall success, have evidently capitalized on the opportunities presented in the current economic landscape. The digital entertainment segment, primarily through its Garena platform, continues to engage users worldwide with popular titles like Free Fire. Meanwhile, Shopee, Sea's e-commerce arm, has further solidified its position in the competitive online retail market. The digital financial services sector is also making strides, enhancing the financial inclusivity of its user base across various regions.
Forrest Li's highlight of the impressive results in the first half of the year serves as a strong indicator for Shopee's outlook in 2024. This optimism is grounded in the company's strategic initiatives and the growing acceptance of e-commerce platforms among consumers. Shopee's ability to innovate and tailor its offerings to meet the diverse needs of its customers across Southeast Asia and beyond is a key factor in its continued success.
The financial outcomes disclosed by Sea Limited reflect not only the company's resilience but also its potential for sustained growth in the coming periods. As the company navigates through the complexities of the global market, its comprehensive approach to expanding its business sectors and enhancing profitability is commendable. Sea Limited's performance, as detailed in the announcement, underscores its position as a formidable player in the internet industry, poised for further achievements in the future.
Sea Price Target Raised at BofA Securities, Shares Rise 2%
Sea (NYSE:SE) shares rose nearly 2% in pre-market today after BofA Securities analysts increased their price target for the company to $77 from $75, maintaining a Buy rating on the stock.
The analysts expect Sea to present stable Q2 results, with a reduction in losses for Shopee and sustained trends for Garena. Revenue is projected at $3.8 billion, indicating a 23% increase, with an anticipated positive net income of $25 million for the quarter, compared to a $24 million loss in Q1.
In the e-commerce segment, the analysts forecast a 2% quarter-over-quarter decline in gross merchandise volume (GMV) to $23.1 billion, impacted by forex headwinds, while the take rate is expected to rise to 12.1% from 11.6% due to improvements observed in the first quarter.
Despite heightened competition, the analysts note it remains rational. Due to seasonal factors, increased investments are expected in the second quarter, leading to an estimated small EBITDA loss of $5 million for Shopee.
In the gaming sector, despite the second quarter typically being slower, steady momentum is expected, driven by young gamers in Indonesia and some content updates from the company. Gaming revenues and EBITDA are projected to remain flat quarter-over-quarter. For the digital financial services (DFS) segment, a continued slowdown in revenue momentum is anticipated, with an estimated $20 million quarter-over-quarter addition to revenue, leading to a deceleration in growth. EBITDA margins are expected to remain largely flat quarter-over-quarter. The slowdown is attributed to the management's cautious approach to unsecured loans and experimental zero-interest loans aimed at increasing the adoption of lending services.
Sea Earns an Upgrade at JPMorgan
JPMorgan analysts upgraded Sea Ltd. (NYSE:SE) to Overweight from Neutral, significantly increasing the price target to $70.00 from $43.00.
The bank’s analysis suggests that in the face of current market competition, Sea is positioned to elevate its commission rates while potentially scaling back on sales and marketing expenditures. Despite anticipating that elevated take rates might introduce fluctuations in earnings expectations based on competitive dynamics, the analysts advise investors to leverage these shifts in earnings projections.
The analysts anticipate near-term positive adjustments in earnings forecasts, primarily driven by the e-commerce sector, prompting the upgrade to Overweight.
Sea Earns an Upgrade at JPMorgan
JPMorgan analysts upgraded Sea Ltd. (NYSE:SE) to Overweight from Neutral, significantly increasing the price target to $70.00 from $43.00.
The bank’s analysis suggests that in the face of current market competition, Sea is positioned to elevate its commission rates while potentially scaling back on sales and marketing expenditures. Despite anticipating that elevated take rates might introduce fluctuations in earnings expectations based on competitive dynamics, the analysts advise investors to leverage these shifts in earnings projections.
The analysts anticipate near-term positive adjustments in earnings forecasts, primarily driven by the e-commerce sector, prompting the upgrade to Overweight.
