ANALYSTS were bullish on tech giant Sea as they lifted target prices for the counter by between 10 and 39 per cent, citing its consensus-beating performance and bright outlook for 2025.
The tech company on Tuesday (Mar 4) posted a Q4 net profit of US$237.6 million for the three months ended Dec 31, reversing a loss of US$111.6 million in the year-ago period. It also provided guidance for higher 2025 growth and profitability for its e-commerce arm Shopee.
Maybank ramped up its target price by 39.2 per cent to US$174 from US$125, CGS International raised it by 14 per cent to US$155 from US$136, and UOB Kay Hian (UOBKH) lifted it by 10.4 per cent to US$153.11 from US$138.70. All three brokerages maintained their “buy” calls.
Shares of New York-listed Sea ended at US$139.15, after it slid nearly 5 per cent on Thursday.
Highlighting Sea’s “stellar” delivery for Q4 FY2024 and strong 2025 guidance, Maybank analyst Hussaini Saifee said on Thursday that the counter offers “attractive valuations” and was “firing on multiple cylinders”.
“The company benefits from multiple tailwinds in all segments which could be further boosted by leveraging artificial intelligence,” Saifee said.
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“While the stock has risen by four times since (the) start of 2024, we see valuations at lower-inline with its peers while growth remains at the higher end, offering attractive valuations,” he added.
CGS International analysts Kenneth Tan and Lim Siew Khee on Wednesday said Sea’s Q4 adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) and revenue “beat expectations”.
This “outperformance” was driven mainly by its e-commerce arm Shopee, Tan and Lim said.
“Two key positives for Shopee in Q4FY2024 were (its) strong gross merchandise value (GMV) growth (of) 24 per cent year on year on user and order frequency growth, and solid adjusted Ebitda-to-GMV margin expansion,” they said.
Similarly, UOBKH analysts John Cheong, Llelleythan Tan and Heidi Mo on Wednesday said Sea’s net profit for FY2024 was “above expectations”.
“It recorded its second year of profit of US$444 million (an increase of 195 per cent year on year), beating our forecast by 23 per cent. This was due to lower-than-expected sales and marketing expenses during the year,” they said.
They added that its “record” Q4 FY2024 earnings were driven by Shopee and its digital finances services unit SeaMoney.
SeaMoney has become Sea’s second-largest unit, overtaking its digital entertainment unit Garena. The latter registered “modest” growth for the quarter, said Cheong, Tan and Mo.
Bright 2025 outlook, Shopee growth forecasts
Maybank’s Saifee predicts market share growth for Shopee. “We estimate Asean e-commerce GMV growth in the mid-teens as Shopee lifts its market share. Its key competitors – TikTok Shop and Lazada – are relatively rational, while Temu is yet to make a mark.
“However, we only expect a 48 basis points improvement in adjusted Ebitda/GMV margin in 2025 as we think Shopee is likely to invest back in growth and keep its services competitive to fend off competition,” Saifee added.
CGS International’s Tan and Lim highlighted Sea’s “robust guidance” for 2025 as indicative of another year of “strong growth ahead”.
They also predict strong growth on improvements in Shopee’s profitability.
“With the competitive landscape remaining stable, Sea believes there is still room to grow marketplace take-rates over the next few quarters, albeit at a slower pace than that observed in 2024,” they said.
This comes as the group has continued to work on driving down logistics costs and improving delivery speeds, with “meaningful growth seen for same-day deliveries”, as it sees these factors as “longer-term competitive moats”, they added.
“We expect FY2025 to record steady adjusted Ebitda margin growth on the back of lower cost per order via enhanced scale and efficiency,” said Tan and Lim.
Likewise, UOBKH forecast significant improvements in Sea’s earnings for 2025.
They predict a target of around 20 per cent GMV growth and “improving profitability for Shopee in 2025, backed by impressive performance in Brazil… a strengthening logistics network and improved revenue generation with the integration of artificial intelligence to bolster seller ad spend”.
Growth in digital financial services and entertainment arms
UOBKH expects Sea’s loan book size to grow by more than 20 per cent on the year on expanded credit offerings both on and off Shopee.
“With credit card usage remaining low in most of its markets, management believes its SPayLater product serves as a virtual credit card to fill the market gap.” SPayLater is a payment option on Shopee provided by SeaMoney.
Maybank’s Saifee sees upside potential for Garena.
“We remain hopeful of its in-house developed game Free City, which is still in the soft launch phase. It’s a game similar to highly popular Grand Theft Auto, but tailored to run on mobile devices which enhances its potential for success,” he said.
