Morgan Stanley analysts downgraded shares of Sea Ltd. (NYSE:SE) to Equal-Weight from Overweight in a note Monday, lowering the price target for the stock to $47 from $55 per share.
The analysts stated that part of the reason they downgraded the stock is because they expect the e-commerce uncertainty to persist.
"Competitive intensity in ASEAN e-commerce (EC) has increased since the summer," the analysts noted. "While the temporary closure of TikTok Shop in Indonesia in early October might have acted as a catalyst to slow down marketing spend by incumbents, it has actually proved quite the opposite, with all players upping the ante to widen their share of the largest EC market in ASEAN."
"The recent news of the relaunch of TikTok's EC operations in Indonesia will likely mean that this spend will remain elevated for longer. As such, we think SE's earnings predictability for the next 6-12 months is quite low," the analysts added.
Morgan Stanley is moving to the sidelines on the stock until it gets more clarity on the competitive landscape dynamics in Indonesia, the stickiness of GMV once marketing spend tapers, and the unit economics of live-streaming in the region.