Maybank cuts Sea target price by 9.3% on softer Shopee margins, despite consensus-beating Q3 earnings

[SINGAPORE] Maybank Research slashed its target price for internet company Sea by 9.3 per cent to US$156 from US$172 with a “hold” rating, citing softer margins of its e-commerce arm Shopee.

This comes although Singapore-based Sea doubled its Q3 earnings to US$375 million – a 144.6 per cent increase from US$153.3 million in the year-ago period – and posted adjusted Ebitda (earnings before interest, taxes, depreciation, and amortisation) growth of 68 per cent year on year, beating the research house’s and street’s expectations by 4 per cent to 5 per cent.

Shopee’s adjusted Ebitda of US$186 million “marked a second straight quarterly decline”, Maybank Research analyst Hussaini Saifee on Wednesday (Nov 12) said.

This “missed our and street expectations by 15 per cent to 16 per cent, despite solid gross merchandise value (GMV) growth of 28 per cent year on year and 8 per cent quarter on quarter,” Saifee said.

Factoring Sea’s Q3 delivery numbers, the research house has raised Sea’s adjusted Ebitda estimates by 2 per cent to 3 per cent for the FY2025 to FY2027 period but has slashed its target price by 9.3 per cent to US$156 on a lower Shopee valuation.

“While the company is opportunistically prioritising growth and building competitive moats, it may slow near-term monetisation gains,” the analyst said.

He pointed to management’s guidance that projected Shopee’s margins rising in FY2026 though “not linearly as resources are reinvested to prioritise ecosystem depth and scale to sustain GMV growth”.

These areas of investment include fulfilment infrastructure, pre-shipping orders in its warehouses, expansion in rural areas and the expansion of its VIP programme.

Shopee has started offering warehouse fulfilment services in some markets to optimise end-to-end logistics, as Sea chairman and chief executive officer Forrest Li believes its logistics arm SPX Expess is key for long-term growth.

Monee faces margin pressures

While Sea’s digital financial services arm Monee is “growing rapidly”, Saifee predicts that its margins may dip in FY2026. This comes as near-term margin pressures may persist due to “ongoing user and merchant onboarding, product diversification, and marketing investments”, he said.

The business’ Q3 revenue surged 60.8 per cent to US$989.9 million, fuelled by user growth and product expansion across markets.

Saifee noted that Monee’s absolute Ebitda is expected to grow in FY2026, according to management’s projections.

However, he sees “potential margin compression from higher (sales and marketing) spending and aggressive expansion into markets with lower interest rates and higher upfront provisioning”.