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Why Sea Limited Stock Popped 5% Ahead of Earnings

By Rich Smith - Aug 17, 2020 at 12:53PM

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Earnings are due out tomorrow. Cowen predicts a blowout.

What happened

Shares of Singapore-based e-commerce, payments, and online gaming company Sea Limited (SE -0.61%) popped more than 5% in Monday morning trading before settling down to enjoy a still respectable 3.6% gain as of 12:20 p.m. EDT.

You can thank the friendly analysts at Cowen & Co. for that.

Stock up arrow rising over 2020

Image source: Getty Images.

So what

This morning, according to StreetInsider.com, investment bank Cowen nearly doubled its price target on Sea Limited to $150 a share. The reason: Tomorrow before the market opens for trading, Sea Limited is expected to report its fiscal second-quarter 2020 earnings results.

Cowen believes that Sea's Garena gaming business and Shopee e-commerce division will feature prominently in the results. Garena is believed to have grown revenue 30% in the quarter, while gross merchandise volume bought and sold via Shopee may have nearly doubled (up 97% year over year, forecasts Cowen).

Now what

Cowen's not the only analyst expecting big things of Sea tomorrow. On average, analysts polled by Yahoo! Finance forecast 72.5% sales growth at the company, and a narrowed net loss of $0.42 per share.

Granted, the company will almost certainly lose money -- both this year, and next year as well. Still, analysts on average believe that Sea will emerge into profitability by 2022, and grow earnings strongly from there on out. Tomorrow's news should give us further clues as to how far away -- or how near -- the transition to positive profits is looking.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Sea Limited. The Motley Fool has a disclosure policy.

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