To The Moon

Sea Shares Tumble Nearly 10% Amid Valuation Concerns

$Sea Ltd(SE)$   experienced a sharp 9.6% decline overnight, erasing gains accumulated over several weeks. Market observers and analysts are debating the growth outlook of Shopee versus the company's currently high valuation. The stock now trades at a price-to-earnings ratio of approximately 94, a level that suggests even modest profit expectations are fully priced in.

Despite strong business momentum reported in Q2 2025—with Shopee's e-commerce sales growing 33.7%, Garena's gaming bookings rising nearly 23%, and SeaMoney (rebranded as Monee) fintech revenue soaring 70%—concerns about the stretched valuation weigh heavily on investor sentiment. While Shopee has achieved sustained profitability since Q3 2024, and Garena's key title Free Fire continues to expand its user base, the market is cautious given the stock's historically high multiples.

Analysts remain generally bullish, with consensus rating around “Moderate Buy” and average 12-month price targets near $177. JPMorgan is notably optimistic, raising its price target to $230 by citing improving monetization and cost efficiencies in Shopee's business model. However, some caution prevails from outfits like Arete Research, which downgraded to “Neutral” with a $177 target, citing aggressive marketing spend and rising competition as potential headwinds.

Sea's upcoming Q3 results, expected November 11, will be closely watched to assess whether the company can sustain its double-digit revenue growth amid pressure from valuation and competitive dynamics.

For now, investors remain alert to how shifts in marketing costs, Shopee's take rates, and regional fintech expansion will influence near-term profitability and share price performance.

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