Is it too late to buy Sea Limited stock after posting mixed Q3 results?

By:
on Nov 17, 2021
  • Sea Limited shares on Tuesday declined by nearly 4% after reporting its FQ3 results.
  • The company released its most recent quarterly results before markets opened, missing EPS estimates.
  • However, revenue for the quarter surged by 125%, surpassing Street expectations.

On Tuesday, Sea Limited (NYSE:SE) shares declined by nearly 4% after announcing its most recent quarterly results. The company reported its fiscal third-quarter results before markets opened, missing the consensus for earnings expectations. However, revenue for the quarter increased significantly from last year, exceeding analyst estimates.

Sea posted FQ3 GAAP earnings per share of -$0.84, missing the average for analyst expectations of -$0.78. On the other hand, the company’s quarterly revenue increased by a whopping 125% from the same period in 2020 to $2.70 billion, surpassing Street expectations by $240 million.

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Sea Limited shares are still up more than 68% this year and 85% over the last 12 months, thus leaving little room for more upward movement.

Sea looks overvalued

From an investment perspective, Sea shares trade at a steep P/S ratio of 27.11 while its P/B ratio of 50.44, is also enough to scare value investors.

On the other hand, analysts expect its earnings per share to spike by 77% next year, recovering from this year’s forecast marginal decline of 1.20%.

Therefore, although the stock seems expensively valued, it could be an interesting option for growth investors.

Source – TradingView

Technically, Sea Limited shares seem to be trading within an ascending channel formation in the intraday chart. However, the stock has recently pulled back to move towards oversold conditions, thus creating an opportunity for a rebound.

Nonetheless, with the stock far from retesting the trendline support and the 100-day moving average, the current decline could continue for the foreseeable future. 

Therefore, investors could target extended declines at about $312.01, or lower at $290.89, while $349.55 and $371.45 are crucial resistance zones.

It may not be too late to take some profits

In summary, although Sea Limited shares are down 7.57% over the last 30 days, the stock is still up more than 68% this year. In addition, Sea seems to have room left for more downward movement before reaching oversold conditions.

Therefore, it may be best to wait for the stock to move closer to the trendline support before buying.

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