Morgan Stanley maintains target on Sea Ltd. shares amid Investing.com antitrust case

Morgan Stanley on Tuesday maintained its Overweight rating on Sea Ltd. (NYNYSE::SE) with a price target of $70.00 per share, despite recent developments in the antitrust case involving the company’s subsidiary in Indonesia.

Sea Ltd. is currently facing charges from Indonesia’s antitrust agency KPPU for allegedly engaging in anti-competitive practices by favoring its own delivery service Shopee Xpress and excluding other suppliers.

The hearing in this case began on May 28, 2024, and it is expected that in the short term it will have a negative impact on the company’s stock price. The allegations suggest that Shopee’s local unit may have directed customers to use certain delivery services, including its own logistics.

Potential penalties if the company is found guilty can range from a minimum fine of Rp 1 billion (about $62,000) to more severe financial consequences, including up to 50% of net profits or 10% of sales during the period of the alleged violation.

The outcome of the case remains uncertain, as there is a possibility that Shopee will be required to reintroduce a wider range of delivery service providers to its platform.

While the company did not disclose sales by country, it estimates that about 30% of its e-commerce revenue of $9 billion in 2023 comes from Indonesia.

Morgan Stanley’s analysis refers to a precedent from last year, when the KPPU imposed fines on several cooking oil producers for limiting sales during a period of shortages. Fines in these cases ranged from 1 billion rupiah to 40.9 billion rupiah (about $2.6 million).

The company’s assessment suggests that even in a best-case scenario where Shopee only needs to provide more delivery options, the impact may be relatively limited due to Shopee’s superior cost structure compared to third-party logistics services.

InvestingPro Insights

As Sea Ltd. (NYSE:SE) navigates the complexities of the antitrust case in Indonesia, investors may consider the company’s broader financial health and market performance. According to InvestingPro data, Sea Ltd. has a market capitalization of $41.34 billion, with revenues growing 9.26% over the last twelve months, starting from the first quarter of 2024. The company’s stock has performed well, achieving a total return on level of 14.51% during the last quarter. last month and an impressive 50.74% over the last three months. Moreover, the stock is trading near its 52-week high of 96.84% of its peak price.

InvestingPro’s guidance shows that Sea Ltd. has more cash than debt on its balance sheet and net profit is expected to increase this year. These indicators can reassure investors that the company is able to cope with potential penalties and invest in growth despite the legal challenges it faces. Additionally, four analysts revised their earnings upwards for the coming period, signaling a positive outlook for the company’s financial results. For investors looking for further guidance, InvestingPro has additional guidance on how to use a coupon code PRONEWS24 can provide an additional 10% discount on 1- or 2-year Pro and Pro+ subscriptions.

This article was generated with the assistance of AI and reviewed by an editor. More information can be found in our Regulations.