SEA Limited (NYSE: SE) & COUPANG (NYSE: CPNG) Stock Analyses

Sven continues his research into interesting Asian companies, focusing on Sea Limited and Coupang as potential additions to his globally diversified and educational portfolio. Sven notes that his research platform, which employs a value-investment strategy, has yielded approximately 15% since 2018.

Sven provides a detailed analysis of Sea Limited, highlighting its three business segments: Gaming (Garena), E-Commerce (Shopee), and Financial Services. He acknowledges the company's growth in revenue, increasing momentum across all segments, and improving profits, especially with Shopee's strong expansion in Southeast Asia and Brazil. However, Sven expresses significant caution regarding several aspects. He points out the extensive investments in lending services, which consume substantial cash, and the stabilization of the gaming segment post-pandemic. Sven also notes the considerable stock-based compensation (625 million), which appears high compared to the recently positive net profit and is offset by share buybacks. Despite Wall Street analysts generally rating Sea Limited as a "BUY" with high price targets and expectations of 25% annual net profit growth, Sven warns against blindly following these forecasts. He argues that once the rapid growth slows due to competition, the valuation is likely to contract sharply, potentially dropping to a price-to-earnings (P/E) ratio of eight. Sven illustrates this by suggesting that even if the company reaches an EPS of 6 by 2028, a P/E of 8 would result in a stock price of $48, representing a 50% loss from current levels, because the market would then price in the slowing growth of future years. He classifies Sea Limited as a high-growth, risky investment, perhaps better suited as a "bet."

Sven then turns his attention to Coupang, a company he once wanted to analyze but was later forgotten. Sven is highly critical, labeling it a "fake company" and an "investment trap." He points out that while Coupang presents itself as a US technology company with global reach, its operations are predominantly in South Korea, making it primarily a Korean firm despite minor expansions into Taiwan and the acquisition of Farfetch. Sven observes a lack of profitable growth, persistent negative cash flows, a growing deficit, and significant shareholder dilution, similar to Amazon's early days but without the same market conditions. He asserts that Coupang, like many other e-commerce "super-apps" attempting to be "the next Amazon," faces the fundamental problem that when growth inevitably stabilizes and profits diminish, their valuations become extremely unattractive. Sven warns that this scenario could eventually impact other comparable companies like Mercado Libre, too.