Asian Equities Traded in the US as American Depositary Receipts Trend Lower in Wednesday Trading

Sea Limited Sponsored ADR (SE) is one of the stocks most watched by Zacks.com visitors lately. So, it might be a good idea to review some of the factors that might affect the near-term performance of the stock.

Over the past month, shares of this company have returned -1.5%, compared to the Zacks S&P 500 composite's +1.8% change. During this period, the Zacks Internet - Software industry, which Sea Limited falls in, has gained 3.5%. The key question now is: What could be the stock's future direction?

While media releases or rumors about a substantial change in a company's business prospects usually make its stock 'trending' and lead to an immediate price change, there are always some fundamental facts that eventually dominate the buy-and-hold decision-making.

Revisions to Earnings Estimates

Here at Zacks, we prioritize appraising the change in the projection of a company's future earnings over anything else. That's because we believe the present value of its future stream of earnings is what determines the fair value for its stock.

We essentially look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest business trends. And if earnings estimates go up for a company, the fair value for its stock goes up. A higher fair value than the current market price drives investors' interest in buying the stock, leading to its price moving higher. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

Sea Limited is expected to post earnings of $0.57 per share for the current quarter, representing a year-over-year change of +850%. Over the last 30 days, the Zacks Consensus Estimate has changed -4%.

The consensus earnings estimate of $2 for the current fiscal year indicates a year-over-year change of +47.1%. This estimate has changed -0.8% over the last 30 days.

For the next fiscal year, the consensus earnings estimate of $2.09 indicates a change of +4.8% from what Sea Limited is expected to report a year ago. Over the past month, the estimate has changed -0.3%.

Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock's price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, Sea Limited is rated Zacks Rank #3 (Hold).

The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:

12 Month EPS

Revenue Growth Forecast

While earnings growth is arguably the most superior indicator of a company's financial health, nothing happens as such if a business isn't able to grow its revenues. After all, it's nearly impossible for a company to increase its earnings for an extended period without increasing its revenues. So, it's important to know a company's potential revenue growth.

For Sea Limited, the consensus sales estimate for the current quarter of $4.12 billion indicates a year-over-year change of +19.3%. For the current and next fiscal years, $16.32 billion and $18.8 billion estimates indicate +25.7% and +15.2% changes, respectively.

Last Reported Results and Surprise History

Sea Limited reported revenues of $3.91 billion in the last reported quarter, representing a year-over-year change of +29.9%. EPS of $0.46 for the same period compares with $0.83 a year ago.

Compared to the Zacks Consensus Estimate of $3.73 billion, the reported revenues represent a surprise of +4.73%. The EPS surprise was -22.03%.

The company could not beat consensus EPS estimates in any of the last four quarters. The company topped consensus revenue estimates three times over this period.

Valuation

Without considering a stock's valuation, no investment decision can be efficient. In predicting a stock's future price performance, it's crucial to determine whether its current price correctly reflects the intrinsic value of the underlying business and the company's growth prospects.

Comparing the current value of a company's valuation multiples, such as its price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its own historical values helps ascertain whether its stock is fairly valued, overvalued, or undervalued, whereas comparing the company relative to its peers on these parameters gives a good sense of how reasonable its stock price is.

The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to both traditional and unconventional valuation metrics to grade stocks from A to F (an An is better than a B; a B is better than a C; and so on), is pretty helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.

Sea Limited is graded D on this front, indicating that it is trading at a premium to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.

Bottom Line

The facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about Sea Limited. However, its Zacks Rank #3 does suggest that it may perform in line with the broader market in the near term.

Zacks Investment Research

The broad market exchange-traded fund SPDR S&P 500 ETF Trust and the actively traded Invesco QQQ Trust were each 0.1% higher in Wednesday's premarket activity, as investors await October's jobs report to shed some light on potential interest rate cuts.

US stock futures were mixed, with S&P 500 Index futures up marginally, Dow Jones Industrial Average futures slipping 0.2%, and Nasdaq futures gaining 0.1% before the start of regular trading.

US mortgage applications dropped 0.1% in the week ended Oct. 25 as average 30-year mortgage rates climbed to 6.73%, the highest since July, with refinance applications down 6% and purchase applications up 5%, according to Mortgage Bankers Association data Wednesday.

ADP Employment for October rose 233,000 compared with prior 159,000 increase and expected 111,000 gain. The Q3 gross domestic product (GDP) first estimate from Washington will post at 8:30 am ET.

September's pending home sales index is slated for a 10 am ET release, followed by the weekly EIA petroleum status report at 10:30 am ET. The October Atlanta Fed Survey of Business Uncertainty will be posted at 11 am ET.

In premarket action, bitcoin was down by 0.4% and the cryptocurrency fund ProShares Bitcoin Strategy ETF was 0.2% lower.

Power Play:

Health Care

The Health Care Select Sector SPDR Fund retreated 1.3%. The Vanguard Health Care Index Fund was down 1.1% while the iShares US Healthcare ETF slipped 0.8%. The iShares Biotechnology ETF was inactive.

Eli Lilly stock was down about 10% premarket after the company reported lower-than-expected Q3 results and cut its 2024 non-GAAP earnings guidance.

Winners and Losers:

Consumer

The Consumer Staples Select Sector SPDR Fund was down 0.1%, while the Vanguard Consumer Staples Fund was 1.3% higher. The iShares US Consumer Staples ETF was inactive, and the Consumer Discretionary Select Sector SPDR Fund gained 0.4%. The VanEck Retail ETF was inactive, while the SPDR S&P Retail ETF was flat.

Brinker International shares were up 6% pre-bell after the company reported higher fiscal Q1 results and lifted its guidance for fiscal 2025.

Industrial

Industrial Select Sector SPDR Fund retreated 0.2% while the Vanguard Industrials Index Fund and the iShares US Industrials ETF were inactive.

Caterpillar stock was down 2.6% before the opening bell after the company reported lower Q3 adjusted earnings and revenue.

Technology

Technology Select Sector SPDR Fund retreated 0.5%, and the iShares US Technology ETF was flat, while the iShares Expanded Tech Sector ETF was up 0.1%. Among semiconductor ETFs, SPDR S&P Semiconductor ETF was inactive, while the iShares Semiconductor ETF fell by 2.5%.

Daqo New Energy shares were up 3.3% in recent Wednesday premarket activity even after the company posted a Q3 adjusted loss and lower revenue.

Energy

The iShares US Energy ETF was inactive, while the Energy Select Sector SPDR Fund was up by 0.2%.

Uranium Royalty stock was up 1% before Wednesday's opening bell after the company said late Tuesday it had named Ken Robertson as a director of the company.

Financial

Financial Select Sector SPDR Fund slipped by 0.1%. Direxion Daily Financial Bull 3X Shares was flat, while its bearish counterpart Direxion Daily Financial Bear 3X Shares was 0.5% higher.

Bank of America shares were down 1.7% pre-bell Wednesday after the company said in a Tuesday filing that it is in talks with the Consumer Financial Protection Bureau over a potential resolution or enforcement action on the watchdog's inquiry into the company's electronic payments processing through the Zelle network.

Commodities

Front-month US West Texas Intermediate crude oil rose 1.3% to $68.08 per barrel on the New York Mercantile Exchange. Natural gas declined 0.2% to $2.85 per 1 million British Thermal Units. United States Oil Fund was up 1.2%, while the United States Natural Gas Fund lost 0.1%.

Gold futures for December advanced 0.4% to $2,793.20 an ounce on the Comex, while silver futures declined 0.4% to $34.30 an ounce. SPDR Gold Shares gained 0.3%, and iShares Silver Trust was 1% lower.