Morgan Stanley Upgrades Sea Limited to Overweight, Targets 15% Gain

Morgan Stanley has upgraded its rating for Sea Limited (SE.US) to "overweight," setting a target price of $190, which is 15% higher than the current stock price. This upgrade is driven by several positive factors, including increased e-commerce commission rates in the Philippines and Vietnam, as well as the expansion of Sea's business in Brazil. The company's subsidiary, Shopee, has opened a new distribution center in Brazil, which is expected to enhance its logistics capabilities and market presence in the region.

The analysts at Morgan Stanley highlighted that the improved profitability in the industry, coupled with the strategic expansion into Brazil, positions Sea Limited for significant growth. The new distribution center in Brazil is a key component of this strategy, as it will allow Shopee to better serve the growing e-commerce market in the region. This move is expected to drive increased sales and market share for Sea Limited, further bolstering its financial performance.

According to recent channel checks, Shopee and Lazada have increased seller commission fees in the Philippines, Vietnam, Malaysia, and Indonesia. This development is seen as a positive signal for the industry's profitability. Additionally, in the first quarter of 2025, Morgan Stanley expects Shopee's growth to be accompanied by an increase in profit margins. This is attributed to a reduction in logistics costs per order, growth in advertising revenue, and a continuous increase in adoption rates.

In Brazil, Shopee has opened its second distribution center. Morgan Stanley believes that Shopee's investment in fulfillment infrastructure and focus on logistics optimization will drive continuous improvements in unit economics and service quality. This will also expand Shopee's business coverage in Brazil, further solidifying its position in the region.

Overall, the upgrade by Morgan Stanley reflects a growing optimism about Sea Limited's prospects. The company's strong presence in Southeast Asia, combined with its expanding footprint in Latin America, positions it well to capitalize on the global e-commerce boom. The increased commission rates in the Philippines and Vietnam are also expected to contribute to higher revenues and profits for the company. This strategic expansion into Brazil, along with the improved profitability in key markets, positions Sea Limited for continued success in the global e-commerce landscape.