$Sea Limited(SE)$ stock is drawing attention as the Singapore-based internet services company is scheduled to report first-quarter 2025 results before the US market opens on Tuesday, May 13. Shares have gained more than 31% as of May 12 this year.
Key Factors to Note Ahead of Q1 Results
Q1 Revenue is Expected to Increase 31% YoY
Singapore-based Sea operates Shopee, which is the largest e-commerce platform in Southeast Asia and has also expanded to parts of Latin America. Other holdings include digital-payments provider SeaMoney and Garena, a global online games developer.
The Singapore-based company is expected to report a 31% increase in revenue to $4.885 billion from $3.73 billion a year ago, according to Bloomberg’s unanimous expectations. Adjusted EPS is estimated to be $0.80, swings to profit YoY. E-commerce revenue is seen rising 32.3% to $3.7 billion.
The report should offer a look at how global trade tensions are affecting Sea's business. Sea's Shopee does not operate in the U.S. but shares still fell 10% on April 3, following President Donald Trump's "Liberation Day" tariff announcements.
Sea stock recovered in the weeks since. But some analysts still are concerned that broader trade instability could weigh on the company, particularly after Sea stock's big rally in the past 18 months.
JPMorgan analyst Ranjan Sharma downgraded his view of Sea stock to neutral from a positive overweight in an April 16 client note. Sharma recommended clients take profits from Sea after its 244% rally from a low in January 2024.
"Macro headwinds and softer consumer spending could weigh on GMV (gross merchandise value) growth and ad spending," Sharma wrote in the client note. "It could also weigh against further increases in seller commissions. Moreover, amid macro uncertainties, SeaMoney could face risks of higher credit costs and optimize lending."
The current average analyst rating on the shares is "buy" and the breakdown of recommendations is 28 "strong buy" or "buy," 4 "hold" and no "sell" or "strong sell."
Strong Gains in Fintech and Gaming Offset E-Commerce Headwinds
Sea Limited’s first-quarter 2025 results are expected to have benefited from the continued expansion of its digital financial services, particularly in consumer and SME lending across Southeast Asia and Brazil. The credit segment, which remains the key revenue driver, recorded a more than 60% year-over-year loan book surge in the fourth quarter of 2024. With ongoing improvements in credit penetration, this segment is well-positioned to have driven robust revenue expansion in the quarter.
Garena, a global leader in online gaming. Its Free Fire franchise is expected to have delivered a strong performance in the first quarter of 2025, driven by the high-profile NARUTO SHIPPUDEN collaboration launched in January. This partnership brought new content and excitement to the game, driving robust user engagement. The success of this launch is expected to have supported Garena’s growth trajectory and enhanced revenue performance in the quarter under review.
The company’s end-to-end logistics integration, particularly via SPX Express, is expected to have contributed positively to the first-quarter 2025 performance. SPX Express continued to raise service standards, with faster and more reliable deliveries across Southeast Asia. Nearly 50% of SPX Express parcels in Asia are delivered within two days, indicating year-over-year gains, and are likely to have improved customer experience and platform retention.
However, seasonal softness in the e-commerce sector during the early part of the year is expected to have posed headwinds for Shopee’s growth momentum in the first quarter of 2025.
In addition, the competitive landscape in e-commerce has been highly competitive, potentially pressuring take rates and requiring ongoing investment in service quality.
Analysts Divided on Sea Ltd: BofA Cuts to Neutral; UBS, MS Maintain Buy Stance
BofA Securities revised its stance on Sea Ltd, downgrading the company’s stock rating from Buy to Neutral, while setting a new price target of $160.
The research firm’s analysts noted that the adjustment was due to a more balanced risk-reward scenario following Sea Ltd’s strong performance. They acknowledged the company’s impressive fundamentals but indicated that the current consensus already reflects optimistic expectations for Sea’s future growth and profitability.
Analysts at BofA Securities highlighted that the consensus estimates are projecting robust year-on-year growth for Sea Ltd’s various business segments. For e-commerce, they anticipate revenue growth of 25% and 19% for 2025 and 2026 respectively, with EBITDA margins as a percentage of GMV at 0.7% and 1.2%. The gaming sector is expected to see revenue increases of 16% and 10% for the same periods, along with slight margin improvements. Additionally, the Digital Financial Services (DFS) segment, which includes Monee, is forecasted to grow 29% and 24% in revenues.
Despite the downgrade, BofA analysts remain positive about the fundamental aspects of Sea Ltd’s business. However, they expressed caution regarding the company’s potential to continue surpassing expectations in future quarters, especially in light of a decelerating macroeconomic environment. The analysts’ commentary suggests that while the company’s current momentum is well recognized by the market, there may be limited opportunities for significant upside in the near term.
In other recent news, Sea Ltd’s financial performance and stock ratings have been the subject of multiple analyst reports. UBS has increased its price target for Sea Ltd to $176, maintaining a Buy rating, following strong fourth-quarter results and promising 2025 guidance that exceeded expectations. UBS highlighted robust growth and improved margins in both e-commerce and fintech segments. Similarly, Loop Capital Markets raised its price target to $165 while maintaining a Buy rating, citing significant long-term earnings potential and a strong position in Southeast Asia’s e-commerce market.
Morgan Stanley maintained an Overweight rating with a $167 price target, emphasizing Sea Ltd’s strong execution and potential for substantial EBITDA growth by 2025.
Morgan Stanley’s analysis also noted a 21% year-over-year growth in e-commerce Gross Merchandise Value and a 50% increase in revenue for digital financial services. The gaming division, particularly Garena’s Free Fire, continues to contribute positively, with a 35% year-over-year revenue increase. These recent developments provide investors with insights into Sea Ltd’s current market position and future prospects across its diverse business segments.
Options Strategies to Trade Sea’s Earnings
1. Bullish Strategy: Call Debit Spread (May 16 Expiry)
Structure:
Buy May 16 $140 Call @ $6.18 (mid-price)
Sell May 16 $145 Call @ $4.20 (mid-price)
$SE Vertical 250516 140.0C/145.0C$
Cost/Net Debit : $1.98 per spread
Max Profit: $295
Breakeven: $142.05
Max Loss: Limited to $205 (if SE ≤ $140 at expiry).
Rationale:
Targets a post-earnings rally above $142.75.
Limits downside risk vs. buying a standalone call.
High implied volatility (~102%) justifies defined-risk structure to offset premium decay.
2. Bearish Strategy: Put Debit Spread (May 16 Expiry)
Structure:
Buy May 16 $135 Put @ $4.75 (mid-price)
Sell May 16 $130 Put @ $2.05 (mid-price)
$SE Vertical 250516 130.0P/135.0P$
Cost/Net Debit : $2.55 per spread
Max Profit: $308 per share
Breakeven: $133.08
Max Loss: -$192 (if SE ≥ $135 at expiry).
Rationale:
Profits if SE drops below $132.45 post-earnings.
Capitalizes on elevated put IV (~105%) while capping upfront cost.
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