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On Thursday, JPMorgan analysts downgraded Sea Ltd (NYSE:SE) stock from Overweight to Neutral and reduced the price target from $160.00 to $135.00. The revision reflects a decrease in the 2025/26 group adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) forecasts by 5%. Sea Ltd, a prominent player in the Entertainment industry with a market capitalization of $68.2 billion, has demonstrated strong growth with revenue increasing by 28.75% over the last twelve months. The analysts cited a contraction in the valuation multiple for Sea Ltd’s e-commerce segment from 28 times to 25 times, which is still slightly above MercadoLibre (NASDAQ:MELI) due to Sea Ltd’s higher growth profile.
The downgrade is partly due to an industry-wide valuation derating, which has influenced JPMorgan’s outlook on the company. The firm has adjusted its expectations for Sea Ltd’s e-commerce adjusted EBITDA for fiscal years 2025 and 2026, reducing them by 18% and 11% respectively. This adjustment is driven by lower than previously expected growth in Gross Merchandise Value (GMV) and take rate. According to InvestingPro data, despite trading at a high P/E ratio of 178.8, the company maintains strong fundamentals with a healthy balance sheet and sufficient cash flows to cover interest payments.
Additionally, JPMorgan analysts have also revised their forecasts for Sea Ltd’s fintech adjusted EBITDA, decreasing it by 2% for fiscal year 2025 and by 3% for fiscal year 2026. On the other hand, the firm’s outlook for the gaming segment is more positive, with an increase in the adjusted EBITDA forecast by 4% for both fiscal years 2025 and 2026.
The JPMorgan report emphasizes the changes in expected financial performance and the factors contributing to the revised price target and stock rating. The analysts’ comments provide insight into the specific areas of Sea Ltd’s business that have led to the adjustment, including the e-commerce, fintech, and gaming segments. InvestingPro analysis reveals 17 additional key insights about Sea Ltd’s financial health and market position, available in the comprehensive Pro Research Report, which transforms complex Wall Street data into actionable intelligence for smarter investing decisions.
In other recent news, Sea Ltd has reported several significant developments. UBS raised its price target for Sea Ltd to $176, maintaining a Buy rating, following the company’s strong fourth-quarter 2024 results and optimistic guidance for 2025. Barclays (LON:BARC) also increased its price target to $182, highlighting Sea Ltd’s robust performance in e-commerce, with a notable 23.5% year-over-year increase in Gross Merchandise Value (GMV) and an e-commerce EBITDA that surpassed consensus by 70%. Morgan Stanley (NYSE:MS) continues to support Sea Ltd with an Overweight rating and a $167 price target, citing impressive growth in the Digital Entertainment and E-commerce segments, and expecting a 21% year-over-year growth in EC GMV.
On the other hand, JPMorgan downgraded Sea Ltd from Overweight to Neutral, adjusting the price target to $135 due to concerns over macroeconomic headwinds and consumer spending. Despite these challenges, Loop Capital maintained a Buy rating, raising its price target to $165, emphasizing Sea Ltd’s strong market position in Southeast Asia and potential for long-term earnings growth. The company’s gaming division, particularly Garena’s Free Fire, continues to perform well, contributing to steady cash flow and growth potential. Sea Ltd’s Fintech segment is also seen as a significant growth opportunity, leveraging its e-commerce ecosystem for consumer data insights. These recent developments reflect a diverse range of analyst perspectives on Sea Ltd’s financial health and future prospects.
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