Sea Limited downgraded to Neutral from Buy at Citi

Citi analyst Alicia Yap downgraded Sea Limited to Neutral from Buy with a reduced $50 price target. The company reported “mixed” Q2 results with gaming and e-commerce metrics achieving sequential growth while missing on e-commerce adjusted EBITDA due to stepped up investments, the analyst tells investors in a research note. Sea expects ongoing reaccelerated investment could lead to Shopee EBITDA and company level profit reverting to a loss in future quarters, adds the analyst. The firm agrees this is the right approach to defend market share amid intensified competition, but says no clear direction of gross merchandise volume growth and management’s tolerance of turning back to loss-making suggests there is a lack of visibility on the investments’ effectiveness. Citi says “a brutal battle could be just starting” and believes the shares are likely to be range bound amid a lack of investor confidence.