Tuesday, Sea Ltd (NYSE:SE) received a vote of confidence from Benchmark as the firm raised its price target on the company's shares to $78 from the previous $65, while maintaining a Buy rating. The upgrade follows Sea Ltd's announcement of strong fourth-quarter results, which surpassed expectations in both revenue and profit.
The company's forward-looking FY24 guidance indicates a turning point for its ecommerce and digital entertainment segments. Sea Ltd's ecommerce platform Shopee is projected to experience high teen year-over-year growth in Gross Merchandise Value (GMV), with expectations of EBITDA turning profitable in the second half of the year without losing market share.
Moreover, the company's digital game Free Fire is anticipated to grow at a double-digit rate year-over-year in terms of user base and bookings.
Benchmark highlighted that in the past six quarters, investors have been concerned about Shopee’s ability to sustain growth amidst significant fluctuations and the balance between growth and profitability.
These concerns were exacerbated by increasing competition. However, the firm now believes that Shopee's solid FY24 guidance reflects management's heightened confidence despite competitive pressures.
The report also noted a turnaround for Free Fire, which came as a pleasant surprise. This development is expected to contribute to both growth and profitability for Sea Ltd. (NYSE:SE) Despite the competitive landscape remaining dynamic, Benchmark suggests that the most challenging period may be over for the company.
With an improved growth outlook and changes to estimates, Benchmark has adjusted Sea Ltd's price target upwards, signaling optimism for the company's financial trajectory moving forward.
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