Sea Ltd 2Q23: Revenue Should Align with Consensus, Profitability a Puzzle

Shopee Faces Decision on Brazil Amid Tax Changes

Sea Ltd: Free Fire's Downfall, Shopee’s Struggles, Is Fintech the Next Challenge?

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<ul>
<li>While our outlook for <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea (SE US)</a>'s 2Q23 was bearish, we didn't anticipate such a substantial price reaction post-earnings, considering the existing low consensus.</li>
<li>However, the market appears to have given more importance to the revenue miss and the deterioration of fundamentals in e-commerce, as indicated by the post-earnings price reaction of -28.7%.</li>
<li>Shopee's modest profitability, restrained growth fail to warrant an EV surpassing $7.0bn. The Gaming business is best valued around $3.0bn, while the Fintech arm should be valued at around $5.0bn.</li>
</ul>


While our outlook for Sea (SE US)'s 2Q23 was bearish, we didn't anticipate such a substantial price reaction post-earnings, considering the existing low consensus.
However, the market appears to have given more importance to the revenue miss and the deterioration of fundamentals in e-commerce, as indicated by the post-earnings price reaction of -28.7%.
Shopee's modest profitability, restrained growth fail to warrant an EV surpassing $7.0bn. The Gaming business is best valued around $3.0bn, while the Fintech arm should be valued at around $5.0bn.


Sea Ltd: Share Price Approaching Its Rightful Destination