Finance Jack
Equity Research
The market's worst-case assumptions about Sea Limited's still-unclear Monee IPO and Sea Cloud look like a classic overreaction. Around $75, Sea looks very attractive: not much needs to go right for the investment to work, anything better than the worst case becomes an opportunity, and upside is enormous if things go right. x.com
Forrest Li's drive to keep building businesses through successive cycles could make Sea Limited a compounder for decades. In his letter, Li says Monee is nearing the point where it can stand on its own and that going public could help it grow. He also describes Sea's in-house cloud platform, built over more than ten years to power Garena, Shopee and Monee, as its next startup. x.com
Sea looks super interesting at 18x forward EPS against 30%+ EPS CAGR for 2027-2028. Past periods of heavy investment worked well for Sea, making market punishment for new investment exciting. Cloud-entry capex and limited communication, fierce competition, and uncertainty around the fintech IPO remain concerns. x.com x.com
Sea looks cheap because EBITDA is likely to grow at 25% or more annually for the next few years while it trades at 9x 2027 EV/EBITDA. Sea Cloud should have launched years ago, when raising capital was easier and cheaper; ramping capex now means free cash flow disappears for the next 3-5 years. x.com x.com
Sea Limited isn't worth starting a position in because its pace of investment won't slow, and a quarter of higher investment could bring the stock down fast. It could run in the short term, but the medium-term risk outweighs that until there is clarity on spending. x.com
Sea looks inexpensive at 7.7x EBITDA with 48% revenue growth, against eBay at 15x and 14%. Sea Cloud may resemble early self-funded AWS rather than a debt-heavy neocloud: Sea has $7B net cash, a 10% free-cash-flow yield, 25,000 GPUs for its core business and, it says, 500 staff already on the project. DBS models startup losses, but those are its assumptions. The upside depends on cloud spending not becoming a massive undertaking; earnings clarity on that spending matters. x.com x.com x.com x.com … Show more
Sea could unlock value from its existing fintech and cloud assets, making the selloff look ridiculous. Forrest Li's memo says Monee could stand on its own; a separate listing could give it a valuation and growth capital, though no date or terms are set. Sea Cloud would sell infrastructure already used for Shopee and Garena, not build from scratch. Last-quarter revenue was $7.79B, up almost 50% year over year, against an 18-19 forward P/E. x.com x.com
Sea, MercadoLibre, Nike and Lululemon have potential but are not buys until a confirmed uptrend forms. A good company is not necessarily a great stock, and a downtrend does not reverse on one earnings beat and a few green weeks. Sea gave back all its post-earnings gains as traders took swings, shorts covered and funds bought, showing it had not bottomed. Investors should hold names already trending, with clear higher highs, and keep these on a watchlist. x.com
Sea Limited looks strikingly cheap at under 8 times next-twelve-month enterprise value to EBITDA. x.com
Sea Limited's cash generation and sales have risen sharply while its share price is back at its 2020 level. Annual free cash flow moved from negative $100 million to $4.5 billion and revenue from $2.6 billion to $22.9 billion; at $74 versus a Street consensus target above $150, it is a strong buy and undervalued. x.com x.com
Coupang, Sea and MercadoLibre remain dead money: their charts are broken, they are still overvalued and they face too much competition. Even after recent gains in Sea, they could stay dead money from here; they might be value, but that won't be known for a couple of years, and value traps are a devastating source of capital impairment. x.com x.com
Sea Limited's revenue growth has far outpaced its market value, making the shares interesting at these levels. Revenue is up 150% since Q1 2022 while market cap is down 25%; a multibagger is possible. x.com x.com x.com
