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Is Sea Limited a Buy?

It’s time to talk about a high flying tech name that has been hidden within the market. Here is the breakdown on $SE, otherwise known as Sea LTD.

Current Price: $231.83

52/Wk High: $285.00

52/Wk Low: $35.61

Market Cap: $118 Billion

Read below for the breakdown!

Sea Limited ($SE) is a diverse provider of an online platform made of three core businesses. Sea Ltd operates in three core segments; Digital Entertainment, Financial Services, and E-Commerce.

First up is Gerena, which is the company's Digital Entertainment segment. Second up is Shopee, which is Sea Limited’s e-commerce segment. Finally, SeaMoney is the company's Financial Services segment, which offers digital wallet services and much more.

Taking a look at where Sea LTD operates, the majority of the company's business is within South East Asia, Taiwan, and Latin America.

Given Sea’s heavy exposure to the e-commerce and digital space the stock has gone on a massive run, rallying over 454% to the upside in just the past year alone, leaving investors to wonder if the stock is still a buy.

Digging into the numbers, Sea Ltd missed Q4 expectations, delivering an EPS of $-0.87, lower than the analysts EPS consensus estimate of $-0.54. On a year over year basis, EPS declined 64.15%.

On a positive note, revenues increased by 102% year over year to a strong $1.566 billion. Below is a breakdown of revenues by segment;

Digital Entertainment: $693.4 Million

E-commerce: $842.2 Million

Digital Financial Services: $24.4 Million

Other: $6.6 Million

Closing out revenues it is important to note that digital entertainment revenues finished the quarter up 71.6% year over year while e-commerce revenues finished up 178.3% year over year.

As for gross profit, Sea Ltd reported a quarterly gross profit of $533.7 million, representing an increase in gross profit of 101.5% on a year over year basis.

Rounding out the quarter, total EBITDA was $48.7 million, representing a strong improvement over the Q4 2019 EBITDA of $-104.9 million.

Taking a closer look at Sea’s e-commerce segment, the segment experienced a gross orders increase of 134.6% year over year and reached a strong gross merchandise value (GMV) of $11.9 billion, representing a 112.5% GMV jump.

Highlighting the full year, FY 2020 revenues increased by 101.1% to $4.4 billion while total gross profit increased by a strong 123% to $1.3 billion.

Management provided strong guidance as well, expecting FY 2021 bookings for the digital entertainment segment to total $4.3 billion to $4.5 billion.

Leadership is also expecting e-commerce revenues to land within a range of $4.5 billion and $4.7 billion, representing a midpoint FY 2021 increase of 112.3%.

Shifting into the balance sheet, the numbers are solid.

Total Debt: $1.840 Billion

Total Liabilities: $7.073 Billion

Total Assets: $10.456 Billion

Cash & Short Term Inv: $6.293 Billion

On a valuation basis, Sea Ltd does trade at a premium.

Price to Sales: 27.56x

Price to Book: 32.62x

Management on the other hand has work to do.

Return on Equity: -71.20%

Return on Assets: -20.73%

Return on Invested Capital: -37.64%

Given the numbers the analysts are bullish with a mean price target of $285.29/share, representing a 23.13% gain.

The high price target is $330/share, representing a 42.43% upside while the low price target is $240/share, representing a 3.59% upside.

The big money is quite involved as well with 72.20% of Sea Ltd being owned by institutions. Top holders include T. Rowe Price Associates, Sands Capital Management, and Capital World Investors.

On a technical basis Sea Ltd could be presenting an opportunity. According to the six-month charts the MACD is moving to the downside with significant momentum within a range of -0.89 down to -4.14.

The six-month charts are also indicating an RSI of 47.57 and CCI of -107.09, both of which are on the low end.

In short, Sea Ltd is a solid company with consistent growth, exposure to booming industries, and plenty of room to improve in the many years to come.


Disclaimer: This is not direct financial advice, simply an opinion based on independent research.

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