By Sam Boughedda
Sea Ltd (NYSE:SE) was upgraded to Overweight from Neutral, with its price target lowered to $70 from $85 per share by JPMorgan on Monday.
Sea shares jumped over 8% Monday.
JPMorgan told investors in a research note that Sea's "urgency to achieve self-sufficiency and be cash flow positive supports positive earnings revisions," while the stock is pricing-in concerns regarding its ability to monetize and reduce losses.
"We anticipate swift improvement in profitability and upgrade SE to OW with a Jun-23 PT of $70. Reduction of losses and establishing a path to profitability will be key catalysts. We anticipate 3Q to mark the peak in losses with retrenchment costs and potential impairments of previous investments," the analysts said.
The analysts believe SE's primary focus to achieve self-sufficiency is likely to be pursued in a multi-pronged approach that includes a reduction in costs, exiting experimental projects and growth initiatives, improvement in monetization, reduction in incentives, and increases in basket size.
"We anticipate the improvement in monetization at Shopee to continue. We expect adj EBITDA break-even in 2023E and adj net loss to improve from $2bn in FY22E to $132m in FY23E (consensus: net-loss of $1.43bn); we forecast FY24E net profit of $1.3bn," they added.