As you might know, Sea Limited (NYSE:SE) recently reported its yearly numbers. The statutory results were mixed overall, with revenues of US$4.4b in line with analyst forecasts, but losses of US$3.39 per share, some 9.5% larger than the analysts were predicting. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Following the latest results, Sea's 13 analysts are now forecasting revenues of US$7.67b in 2021. This would be a sizeable 75% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 21% to US$2.69. Before this latest report, the consensus had been expecting revenues of US$6.85b and US$2.07 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts significantly increasing their revenue forecasts while also expecting losses per share to increase. It looks like the revenue growth will not be achieved without incremental costs.
It will come as a surprise to learn that the consensus price target rose 8.6% to US$264, with the analysts clearly more interested in growing revenue, even as losses intensify. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Sea analyst has a price target of US$320 per share, while the most pessimistic values it at US$101. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Sea's rate of growth is expected to accelerate meaningfully, with the forecast 75% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 58% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 15% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Sea is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that the analysts increased their loss per share estimates for next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on Sea. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Sea analysts - going out to 2025, and you can see them free on our platform here.
It is also worth noting that we have found 2 warning signs for Sea that you need to take into consideration.
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