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Sea Limited (SE) stock forecast: Will the downtrend accelerate?

By Alejandro Arrieche

Edited by Alexandra Pankratyeva


Updated

STUTTGART, GERMANY - Aug 23, 2021: Person holding mobile phone with logo of Singaporean technology conglomerate Sea Limited on screen in front of web page Focus on phone display
Sea Limited (SE) stock forecast: Will the downtrend accelerate? – Photo: Shutterstock

The price of Sea Limited (SE) stock has been on a sharp downtrend since October last year as the combination of a fading pandemic tailwind and expected changes in the macroeconomic landscape have weighed on the valuation of most tech stocks.

Even though the business beat analysts’ revenue estimates in the past couple of quarters, the Sea Limited stock market price has experienced a 59.3% loss since the year started (as of 15 March).

What could be expected from the stock of this tech company in 2022 and in coming years? In this article, we will analyse the latest Sea Limited stock news along with its price action and fundamentals to outline plausible scenarios for the future. 

Sea Limited stock analysis: Technical view and price drivers

Sea Limited (SE) technical analysis

Back in early February this year, the Sea Limited stock value broke above the descending price channel formation highlighted in the chart and kept climbing for a few days.

However, a risk-off attitude adopted by market participants amid an expected shift in the monetary policy of major central banks – including the Federal Reserve – and elevated inflationary pressures in multiple developed countries prompted a selloff in the bond market. This resulted in weakness in the riskier asset classes including equities.

Aside from its year-to-date loss, Sea Limited has been also trading 75.6% below its 52-week high of $372.7 per share indicating how severe the reaction of the market has been to these changes in the macroeconomic landscape. Moreover, the stock is also trading 65.2% below its 200-day Simple Moving Average.

Momentum indicators initially bounced on the back of this early-February uptick but both the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) have made consecutive lower highs since then. This indicates that the stock has once again embarked on a downtrend as momentum remains negative (as of 15 March).

Based on these technical readings, the outlook for Sea Limited stock future price looks bearish and its performance will largely depend on how market sentiment evolves in the current environment. 

David Jones, chief market strategist at Capital.com, said: “Anyone who might doubt that stocks trend should take a look at the chart of Sea over the past couple of years. This period has seen the stock go from around $50 to $370 – then almost all the way back down again. Just this year the price has dropped by more than 60% – and we all know the temptation of buying into a stock that has fallen significantly. But for now that trend remains down – if Sea was to go all the way back to where it started in March 2020 that would mean another 50% fall again from current levels.” 

Sea Limited (SE) five-year performance

The following are some of the most relevant variables to watch to draft a Sea Limited stock prediction:

  • Potential changes in the monetary policy of major central banks – ie, the Federal Reserve, Bank of England, Bank of Japan, etc.

  • The escalation or resolution of the armed conflict between Russia and Ukraine.

  • Changes in the company’s revenue guidance for what remains of the year.

Sea Limited fundamental analysis: Latest earnings

On 1 March, Sea Limited reported its financial results covering the fourth quarter and entire 2021 fiscal year. 

During the three months ended on 31 December, Sea Limited reported total revenues of $3.2bn (£2.5bn) resulting in a 105.7% jump compared to the same quarter a year ago while the firm’s adjusted EBITDA ended at minus $492.1m compared to $48.7m reported the previous year.

For the entire 2021 fiscal year, the group’s total revenues ended at $10bn resulting in a 127.5% year-on-year jump while the company swung to a negative adjusted EBITDA of $593.6m compared to a $107m positive figure reported in 2020.

Digital entertainment revenues accounted for 43% of the firm’s top-line results and grew 114.3% on a year-on-year basis while e-commerce revenues accounted for 51% of the total and grew 136.4% compared to the previous year.

GAAP operating losses for the year ended at $1.58bn compared to the $1.30bn reported the previous year. Meanwhile, GAAP net losses ended the period at $2.04bn compared to a $1.62bn net loss reported by the firm in 2020.

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Sea Limited reported $3.48 in long-term debt in the form of convertible notes by the end of 2021. This resulted in a significant rise compared to the $1.84bn the firm held the previous year.

Total assets ended the period at $10.46bn including $6.17bn in cash and equivalents and $126.10m in short-term investments.

For this year, the company expects that digital entertainment bookings will decline from $4.6bn to a range between $2.9bn and $3.1bn. 

In regards to this pessimistic forecast, the management team stated: 

“With many economies reopening further in the fourth quarter and into this year, we have observed some moderation in online activities and fluctuations in user engagement.
“Moreover, due to unanticipated government actions, Free Fire is currently unavailable in the Google Play and iOS app stores in India. The guidance takes into consideration these headwind factors.”

Sea Limited share price forecast: Analyst sentiment

Commenting on the Sea Limited stock forecast, Jones said: “The trends up and down over the past couple of years have been quite remarkable – but the latest trend is still down. It would take strength through at least the March high of $150 to suggest the downtrend was finally changing. For now it remains an interesting one to watch but the risk remains that rallies will ultimately be met with selling, until we see a change in this major trend.”

According to data from MarketBeat (as of 15 March), the consensus recommendation for Sea Limited was bullish with a total of 12 out of 14 analysts rating the stock at ‘buy’. Two analysts gave it a ‘hold’ recommendation.

The average Sea Limited stock price target was standing at $268.5 per share resulting in a 205% upside potential based on the last closing price of $87.78. The highest forecast for Sea Limited stock future price was set at $400 and the lowest at $105 per share.

Following the release of the firm’s latest earnings report, multiple analysts lowered their price targets for SE stock including Barclays, JPMorgan Chase, Morgan Stanley and Citigroup.

Sea Limited (SE) analyst ratings and price targets

Sea Limited (SE) stock forecast: Targets for 2022, 2025 and 2027

Algorithm-based forecasting service Wallet Investor gave mixed Sea Limited stock projections as of 15 March.

Its outlook for SE stock was bearish in the near term, based on an assessment of multiple technical indicators. It indicated the stock could fall to an average price of $63.132 per share on 29 March 2022.

However, this service expected that the price of Sea Limited stock could rebound and reach $146.76 by the end of 2022, $199.06 by the end of 2023, and $251.77 by the end of 2024. 

According to Wallet Investor’s Sea Limited stock forecast for 2025, the stock could end the year at $304.07. Although the service did not provide price targets for 2030, its five-year SE stock forecast suggested the price could hit $350.10 in March 2027. 

When looking for the Sea Limited stock predictions, it’s important to bear in mind that analysts’ forecasts can be wrong. They have been drafted based on an analysis of the Sea Limited historical stock price, and past performance never guarantees future results.

It’s important to do your own research and always remember that your decision to trade depends on your attitude to risk, your expertise in the market, the spread of your investment portfolio and how comfortable you feel about losing money. You should never invest more than you can afford to lose.

FAQs

Is Sea Limited stock a good buy?

Sea Limited is a growing company that has businesses in multiple up-and-coming sectors including gaming and e-commerce. Even though the company’s financials are robust and its top-line growth seems promising, the management cited multiple headwinds that could affect the performance of the business down the road. A decision to invest in Sea Limited must be made only after assuming all the risks and conducting your own analysis.

Will Sea Limited stock go up or down?

According to the data compiled by MarketBeat (as of 15 March), the consensus recommendation for Sea Limited was a ‘buy’ with an average price target of $268.5 per share.

Why has the Sea Limited stock price been falling?

The combination of two negative catalysts has prompted the latest downtrend in SE stock. These are expected shifts in the global macroeconomic environment and a deterioration of the firm’s growth prospects for 2022, specifically amid weaker-than-expected revenue guidance for its digital entertainment unit.

Markets in this article

SE
Sea Limited
64.32 USD
-1.14 -1.750%

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