Sea Earnings: Navigation to Profitability Seems Rudderless Amid More Cash Burn; Fair Value Cut 20%

We reduce our fair value estimate for Sea by 20% to $43 from $54 after it posted an operating loss of $174 million, which was worse than the Refinitiv consensus profit of $21 million. The company is doubling down on further elevated sales and marketing expenses to reaccelerate its growth in e-commerce, which causes us to lower our operating margin forecast to 5% from 10% next year. We forecast e-commerce losses to continue but taper off in 2026, revised from operating profit in 2023. We reiterate our previous view that Sea and Southeast-Asian e-commerce peers will likely see challenges in achieving both profitability and durable robust growth at the same time.