Sea (NYSE:SE) shares rose nearly 2% in pre-market today after BofA Securities analysts increased their price target for the company to $77 from $75, maintaining a Buy rating on the stock.
The analysts expect Sea to present stable Q2 results, with a reduction in losses for Shopee and sustained trends for Garena. Revenue is projected at $3.8 billion, indicating a 23% increase, with an anticipated positive net income of $25 million for the quarter, compared to a $24 million loss in Q1.
In the e-commerce segment, the analysts forecast a 2% quarter-over-quarter decline in gross merchandise volume (GMV) to $23.1 billion, impacted by forex headwinds, while the take rate is expected to rise to 12.1% from 11.6% due to improvements observed in the first quarter.
Despite heightened competition, the analysts note it remains rational. Due to seasonal factors, increased investments are expected in the second quarter, leading to an estimated small EBITDA loss of $5 million for Shopee.
In the gaming sector, despite the second quarter typically being slower, steady momentum is expected, driven by young gamers in Indonesia and some content updates from the company. Gaming revenues and EBITDA are projected to remain flat quarter-over-quarter. For the digital financial services (DFS) segment, a continued slowdown in revenue momentum is anticipated, with an estimated $20 million quarter-over-quarter addition to revenue, leading to a deceleration in growth. EBITDA margins are expected to remain largely flat quarter-over-quarter. The slowdown is attributed to the management's cautious approach to unsecured loans and experimental zero-interest loans aimed at increasing the adoption of lending services.