By Senad Karaahmetovic
UBS analysts downgraded Sea Ltd (NYSE:SE) shares to Neutral from Buy with the price target slashed to $92 per share (down from $105).
The key factor behind the downgrade is the lacking visibility on top-line growth.
“While our thesis on acceleration of profitability has played out and Sea continues to make progress on margins; growth outlook for 2023 remains uncertain due to changing competitive environment. This could limit positive surprises as cost cuts come to an end in 1-2 quarters,” they said in a downgrade note.
The analysts see potential for margins to improve further in the first half of this year on further cost cuts. They also highlight the year-to-date (YTD) surge in SE shares (+56.6%).
“[SE] trades at 2.9x 24e EV/Sales, a 40-60% premium to Grab and GoTo with slightly lower revenue CAGR (22-25e) of 17% vs. 20% and 23% for Grab and GoTo. At current valuations, we believe risk/reward is balanced,” the analysts concluded.
Sea stock trades 2.6% lower in pre-market Thursday.