By Sam Boughedda
Goldman Sachs reiterated a Buy rating on Sea Ltd (NYSE:SE) but lifted its price target on the stock to $132 from $125 on Thursday.
Analysts told investors in a research note that Sea's e-commerce is on an "accelerated path to profitability," and they believe it will outperform this year and "then demonstrate a return to growth."
"Specifically, we expect Shopee to break even by 2Q23, vs 3Q23 / year-end by VA Consensus and prior GSe/guidance, driven by 1) Marketplace take rate expansion (from 8.7% as of 3Q22 to 9.5% by 2Q23E), 2) Ongoing subsidy cuts/moderating S&M spend, 3) Streamlining G&A expense," said the analysts.
In the mid to longer term, the analysts forecast mid-high teens percent e-commerce growth for the company, reflecting Goldman Sachs' view that "Shopee will start reinvesting again post-breakeven (while staying profitable) in growth to defend its leadership position and expand in growth areas."
"We now see a visible path towards sustained share price recovery," the analysts added.
On the company's gaming prospects, Goldman Sachs believes that the street has already priced in continual EBITDA decline, which provides downside support.
"We continue to see attractive risk-reward outlook with 242% implied upside if we were to assume valuation multiple recovery; vs 32% implied downside assuming no value to Shopee's Latam business and lower target multiples," concluded the analysts.