China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

[Sea (SE US, SELL, TP US$51) TP Change]: Competitive Landscape Intensifying… Cut TP to $51

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[Sea Limited (SE US, SELL, TP US$60) Target Price Change]: Cut Gaming Revenue and Margin Forecast

China/Asia TMT

Shawn Yang

Equity Bottom-Up

<ul>
<li>Sea reported CY2Q23 top-line that missed consensus by 3.4%, while non-GAAP net income beat  by 16%. Sea guided for the net margin to turn negative again in future quarters.</li>
<li>We see deterioration of Sea’s competitive landscape as a long-term trend, hence we cut TP to US$35. The next swing factor is Temu’s ASEAN launch.</li>
<li>Yet, we need to remind investors that Sea’s 3Q earning might have some upside, including user growth of Shopee, as well as stabilization of gaming metrics.</li>
</ul>


Sea reported CY2Q23 top-line that missed consensus by 3.4%, while non-GAAP net income beat  by 16%. Sea guided for the net margin to turn negative again in future quarters.
We see deterioration of Sea’s competitive landscape as a long-term trend, hence we cut TP to US$35. The next swing factor is Temu’s ASEAN launch.
Yet, we need to remind investors that Sea’s 3Q earning might have some upside, including user growth of Shopee, as well as stabilization of gaming metrics.


[Sea Limited (SE US, SELL, TP US$35) Target Price Change]: Long-Term Headwinds Amid Upsides in 3Q