Sachin Salgaonkar, analyst at Bank of America, shared the key learnings from his meetings with investors. Sea Ltd. (NYSE) was among the most talked about stocks.

The following were key findings from SE and the feedback received:

1. The 2022 E-Commerce Guidance is too ambitious. There are also downside risks.
2. Difference of view on Brazil between Asia & US investors;
3. Most likely, Q1 will be a weak quarter.
4. The movement of sea stock seems to be in sync with China’s internet names.

Investors should also consider how to value e-commerce businesses. Salgaonkar points out that stock prices are not supported by valuations.

“Most investors with whom we spoke want to see inflexion points in business mainly – 1) bottoming out of gaming revenue and 2) visibility on cash-burn at the Brazil business. Overall, we found the comfort on Sea mgmt execution amongst to be very high with ask for better & sustained new disclosures. The two commonly asked questions were – expected impact from higher inflation on the business and long-term steady state EBITDA margins. We expect a limited effect on overall ecom spending due to higher inflation. This is because high-end internet users are primarily using the internet, as evidenced by lower penetration and large purchases of long-tail low-priced items. We expect c.12%+ as sustained EBITDA margins,” Salgaonkar wrote in a client note.

Analyst Net-net reiterated a Buy rating of Sea stock, stating that he views current levels as favorable for risk-reward. At current levels, the price target at $230.00 per Share represents a 112% increase in risk-reward.

By Senad Karaahmetovic