Sea Ltd. Stocks See Gains as Citi Upgrades; Positive Outlook on Shopee’s E-commerce Performance

After Citi revised its rating on Sea Ltd. (NYSE:SE) on Thursday, the tech conglomerate from Singapore witnessed a surge of nearly 5% in mid-afternoon trading. The investment firm’s positive sentiment stemmed from its belief that losses for Sea’s Shopee e-commerce unit could soon improve.

Analyst’s Optimism

Uncertainty loomed over the e-commerce landscape in Southeast Asia due to the integration of TikTok shopping (BDNCE) into the Toko app ahead of the Hari Raya promotional campaign. Analyst Alicia Yap expressed her belief that this could prompt Shopee to react, potentially leading to an inflection point in the coming months.

Yap, who raised her rating on Sea to Buy from Neutral and escalated her price target to $50 from $44, mentioned that an improving monetization rate and narrowing EBITDA loss would be key factors in Shopee’s success.

Shopee’s Strategic Shift

Shopee, a key player competing with Alibaba’s (BABA) Lazada, Carousell.com.my, and Amazon (AMZN), is expected to focus more on live streaming orders this year. According to Yap, the orders grew 20 times year-over-year in 2023, with approximately 50% of all merchants in Indonesia now using live streaming as their primary channel.

Overall Company Outlook

Aside from Shopee’s expected performance, Sea is also projected to benefit from “steady” gaming bookings and stable EBITDA margins. Moreover, Yap mentioned that the fintech business is continuously improving its profitability, adding to the positive outlook for the company.

Upcoming Financial Reports

The company is slated to report its fourth-quarter results later this month or in the early part of next month. A consensus of analysts expects the company to lose $0.06 per share on $3.56B in revenue.

Analyst Ratings

Analysts are largely bullish on Sea (SE). It has a HOLD rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha’s quant system, which consistently beats the market, rates SE a HOLD.