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Sea gets price target upgrade from Morgan Stanley

Sea Ltd, Southeast Asia’s most valuable company, saw its first quarter revenue double on the back of drastically improved performance across all segments.

  • Sea Limited (NYSE: SE) share price surges 4.2% to close at US$228 on Tuesday (19 May 2021)
  • The Singapore-based e-commerce and gaming group’s revenue skyrocketed 147% in the first quarter of 2021
  • SeaMoney, its digital payments offering, also saw mobile wallet total payment volume more than triple that of the same period a year prior
  • Morgan Stanley analysts reiterated an ‘overweight’ while raising their price target to US$300 on the stock
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Sea share price: What’s the latest?

Sea Limited shares closed 4.2% higher on Tuesday, after it reported its first quarter earnings for 2021.

The Singapore-based company’s stock is up 16.3% year to date.

Analyst sentiments published by MarketBeat show a consensus rating of ‘buy’ and an average 12-month price target of US$204.92 on Sea.

The price target represents a 10.12% downside from the stock’s last traded price of US$228.

Nevertheless, Morgan Stanley has raised its price target on Sea from US$250 to US$300 while keeping an ‘overweight rating’. The analysts stated that Sea’s ‘super app’ strategy is working well so far.

Breaking down Sea’s first quarter results

Group revenue on an unadjusted (GAAP) basis surged 146.7% for the quarter ended 31 March 2021 to US$1.76 billion from US$714.9 million in the same period a year prior. However, this was below analyst estimates of US$1.81 billion.

The increase was mainly driven by the growth in the digital entertainment, e-commerce and other services as well as sales of goods segments.

Digital entertainment saw GAAP revenue increase by 111.4% to US$781.3 million in the first quarter of 2021 from US$369.7 million in the first quarter of 2020.

The group attributed the growth to an increase in Garena’s active user base as well as the deepened paying user penetration, and in particular, the continued success of its self-developed game Free Fire.

Meanwhile, e-commerce and other services’ GAAP revenue increased by 189.8% to US$772.4 million in the first quarter of 2021, primarily due to a growth in the scale of Shopee - Sea’s e-commerce marketplace, and increase in each of its revenue streams.

Finally, the sales of goods segment recorded a GAAP revenue of US$210 million, a gain of 166.8%.

Looking ahead, Sea maintained its revenue guidance for the year at between US$4.3 billion and US$4.5 billion for digital entertainment, and between US$4.5 billion and US$4.7 billion for e-commerce.

Sea to ramp up digital financial service offerings

Elsewhere, the group ‘continued to see strong growth’ in the adoption of SeaMoney’s offerings.

Mobile wallet total payment volume exceeded US$3.4 billion for the first quarter of 2021, more than tripling that of the first quarter of 2020. Quarterly paying users for mobile wallet services also surpassed 26.1 million in the first quarter.

In view of the outperformance, Sea group chairman Forrest Li said he expects the digital financial services segment’s use cases to grow.

Sea, which won a digital banking licence in Singapore in December 2020, acquired Indonesia’s PT Bank Kesejahteraan Ekonomi earlier this year as part of a wider strategy to establish itself as financial technology leader.

The company now faces stiff competition from Grab and the newly formed GoTo (comprising Indonesia’s Gojek and Tokopedia), with both companies - also offering digital financial services - set to go public in the US later this year.

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