Is Sea LTD a buy after its most recent earnings report?

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: $181.80

52/Wk High: $187.75

52/Wk Low: $35.30


Read below for the breakdown!


Sea Limited 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.


Sea Limited’s most recent earnings numbers were mixed and the company reported its fourth miss in a row.


Sea LTD reported a Q3 EPS of $-0.69 versus the expected analyst’s consensus estimate of $-0.53. On the bright side, revenues continued to grow, rising to $1.2 billion in Q3, representing a 98.7% increase since Q3 of 2019.


Further breaking down revenues, Sea Limited’s Digital Entertainment segment saw GAAP revenues of $569.0 million, representing a 72.9% increase year over year.


Not only that, but the company's e-commerce GAAP revenues exploded in Q3 to $618.7 million, representing 173.3% growth year over year.


Lastly, Sea LTD reported a solid gross profit of $407.6 million, representing a 100.6% year on year jump.


Management also raised guidance on the full year for both of the company’s core segments; digital entertainment and e-commerce.


Digital Entertainment Guidance:


Updated Bookings Guidance full year 2020:


Over $3.1 billion, 75.4% growth.


Previous Bookings Guidance full year 2020:


Range of $1.9 billion to $2.0 billion.


E-Commerce guidance:


Updated GAAP revenue plus sales guidance full year 2020:


Greater than $2.3 billion, 144.1% growth.


Previous GAAP revenue plus sales guidance full year 2020:


Range of $1.7 billion to $1.8 billion.


When it comes to the balance sheet the numbers could be better.


Total Debt: $2.109 billion


Total Liabilities: $5.750 billion


Total Assets: $6.604 billion


Cash & Short Term Inv: $3.448 billion


(Balance sheet levels from Q2 updated data)


Taking a look at valuation, $SE has seen a major increase in its valuation based on the multiples.


Price to Sales: 26.99x


Price to Book: 90.16x


Given the numbers, the analysts remain neutral. Currently, the mean price target for Sea LTD sits at $199.86/share, representing a 9.15% gain.


The high price target sits at $225.00/share, representing a 22.88% gain, while the low price target is $173.00/share, representing a -5.52% loss.


Currently, 70.36% of Sea LTD is owned by institutions. Top holders include Sands Capital Management, T. Rowe Price Associates, and Capital World Investors.


Taking a look at the technicals, while the stock itself has run over 350% in the past year many traders remain bullish. According to the six-month chart, the MACD sits within an upward momentum, within a tight range around 3.41.


Furthermore, the six-month charts are also flashing an RSI of 57.50 and CCI of 96.92, both of which are on the high end of the scale.


Overall, the technicals are not bad and the stock continues to be strong in the upward direction. On a final note, Sea LTD does trade only a few points off its highs.


In short, I like the growth Sea LTD is seeing but believe that the stock is quite high here and a pullback is needed prior to jumping in. In the short term, I expect volatility, and the possibility of pullback, but a long term upward trend throughout the next year is likely.


EAT - SLEEP - PROFIT


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