Sea Q3 Preview: E-commerce, financial arms expected to drive earnings growth

[Shopee, Lazada, Carousell, Tokopedia, Blibli, Bách Hóa XANH, Cho Tot, Tiki and Bukalapak app icons. Assorted online e-commerce companies in Asia]
Robert Way

Singaporean conglomerate Sea (SE [https://seekingalpha.com/symbol/SE]) is expected to post a multi-fold increase in its third-quarter results, scheduled for November 11, before the market opens.

The company, which has presence across industries including e-commerce, gaming and financials, is expected to post earnings per share of $0.95 [https://seekingalpha.com/symbol/SE/earnings/estimates] on revenue of $5.62 billion. The projected revenue translates to an increase of nearly 31% compared to the corresponding quarter last year.

Over the last 2 years, SE has beaten EPS estimates [https://seekingalpha.com/symbol/SE/earnings/eps-surprise-summary] 13% of the time and has beaten revenue estimates 88% of the time.

Seeking Alpha analyst Multiplo Invest [https://seekingalpha.com/article/4838941-sea-q3-earnings-preview-positive-outlook-and-attractive-valuation] believes that the performance of its e-commerce business, Shopee, will be key to Q3 earnings amid heightening competition from rivals like MercadoLibre and TikTok Shop.

Despite this, they see a 27% year-on-year rise in Shopee’s revenue to $3.9 billion. They’ve projected a GMV of $30.5 billion and an adjusted EBITDA of $265 million for the business.

Garena, Sea’s gaming unit, is likely to see a reduction in margins and moderation in growth, the analyst said. Revenue is likely to rise 20% Y/Y to $850 million, but EBITDA margin is expected to fall to 48%.

“In my view, the company continues to face a risk in this operation, which is excessive dependence on the title Free Fire. Although other titles, such as Naruto, have slightly mitigated the risk, there should be stability in the number of users and a reduction in ARPU caused by a less attractive product mix,” Multiplo Invest noted.

The analyst was most optimistic on the firm’s financial services arm Monee. Its revenue is expected to see a 60% upside to $950 million with an EBITDA margin close to 28.5%. They turned bullish on this business segment after the company received approval to offer credit in new markets after Q2, including Brazil, Malaysia, and Indonesia.

Over the last 3 months, Sea’s EPS estimates have seen 2 upward revisions [https://seekingalpha.com/symbol/SE/earnings/revisions] and 5 downward moves, while revenue estimates have seen 9 upward revisions with no downward moves. Year-to-date, the stock has far outperformed the broader markets to advance by nearly 43%.

MORE ON SEA

* Sea Limited: Premium Valuation Backed By Strong Execution And Global Diversification [https://seekingalpha.com/article/4839265-sea-limited-premium-valuation-backed-by-strong-execution-and-global-diversification]
* Sea Q3 Earnings Preview: Positive Outlook And Attractive Valuation [https://seekingalpha.com/article/4838941-sea-q3-earnings-preview-positive-outlook-and-attractive-valuation]
* Sea: The Amazon Of Southeast Asia [https://seekingalpha.com/article/4828441-sea-the-amazon-of-southeast-asia]
* Earnings week ahead: DIS, CSCO, OXY, PLUG, B, AMAT, JD, BYND, PSKY, and more [https://seekingalpha.com/news/4518496-earnings-week-ahead-dis-csco-oxy-plug-b-amat-jd-bynd-psky-and-more]
* Sea CEO Forrest Li envisions $1 trillion market cap with AI boost [https://seekingalpha.com/news/4505810-sea-ceo-forrest-li-envisions-1-trillion-market-cap-with-ai-boost]