Despite maintaining his “buy” call for Sea, DBS Group Research analyst Sachin Mittal has lowered his target price to US$115 from the previous US$256.
In his May 18 note, Mittal says Sea is trading at an enterprise value of 2.9x 12-months forward revenue, versus its 7.2x historical average. “Lack of a clear path to profitability in FY2022/FY2023 and the general market sentiment towards new economy counters could explain the weakness,” says Mittal.
He points out that Sea posted below-par results in 1QFY2022. The company’s total generally accepted accounting principle (GAAP) revenue of US$2.9 billion was 3%-4% below DBS’s expectations.