2023-04-23 01:53:17 ET
Summary
- Sea successfully cut its costs, improving its unit economics, and turning its EBIT positive. However, this comes at the expense of GMV growth, which has been a concern for investors.
- However, we believe that low e-commerce penetration, take rate expansion, large unbanked population offering large potential for digital financial services, and a more rational industry will help drive top-line growth.
- Still, the competition is here to stay, as social commerce is gaining traction. New players could be aggressive, thus forcing existing players to do more promotions and discounts.
- We estimate Sea's fair value at $88 per share derived from 10-year DCF (9% WACC, 4% long-term growth). An aggressive 30% margin of safety suggests that an attractive entry price is $62 per share.
For further details see:
Sea Limited: Ample Room For Growth, But Competition Is Here To Stay