BofA Upgrades Sea After 45% Stock Selloff, 2022 Guidance Will Be Critical

Sea Ltd’s (NYSE: SE) stock has lost around 45% from its peak, with the prospects of a near-term gaming slowdown and concerns around growing ecommerce losses due to expansion in Europe and India largely priced into the stock, according to BofA Securities.

The Sea Analyst: Sachin Salgaonkar upgraded the rating for Sea from Neutral to Buy, while reducing the price target from $385 to $287.

The Sea Thesis: In December, Sea’s ecommerce division, Shopee, signed an agreement with the Brazilian regulator Procon-SP, eliminating regulatory overhang, Salgaonkar said in the upgrade note.

“We find Shopee well positioned competitively to maintain its strong-hold in ASEAN markets and consider most ASEAN markets largely to be a 2 player market between Shopee and Lazada. We see room for Shopee to increase its market share to 50%+ in the medium term,” the analyst wrote.

The MSCI rebalancing around February 28 could lead to around $2.4 billion in passive inflows. “2022 guidance especially for gaming business will be critical to understand if gaming slowdown is largely behind,” Salgaonkar added.

SE Price Action: Shares of Sea had risen by 4.15% to $233.00 in premarket trading on Monday.

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