Maybank cuts Sea target price 16% to $126 on Shopee and AI spending

Maybank Investment Bank Research cut its target price on Sea by 16% to $126 on Wednesday, even as the Singapore tech group's third-quarter revenue beat market expectations by 6%.

The research house kept its "buy" recommendation but trimmed forecasts across the board, citing heavier reinvestment in Shopee, rising AI-related costs, and a more moderate growth outlook for the e-commerce platform. Adjusted EBITDA missed estimates by 6% in the quarter. Revenue grew 43% year on year, while adjusted EBITDA rose 29%, with all three core businesses — Shopee, Garena and Monee — remaining profitable.

Maybank cut FY2027 and FY2028 revenue forecasts by about 2%, adjusted EBITDA estimates by 3% to 4%, and net profit after tax forecasts by 7%. The verdict: Sea still grows, but it costs more to grow.

How fast can Shopee keep growing?

Shopee's gross merchandise value rose 23% year on year in Q3, though adverse FX movements shaved three to four percentage points off reported growth. The increase rested on 20% growth in average monthly active buyers and a 5% rise in purchase frequency.

Maybank trimmed Shopee GMV forecasts by 1% to 2% for FY2026 to FY2028, projecting growth easing to about 18% in FY2027 and 16% in FY2028. Softer consumer spending, currency pressure and tougher comparisons drive the slowdown call.

• Advertising revenue grew more than 55% year on year in Q3; the advertising take rate rose over 80 basis points.
• Much of that revenue goes back out the door: competitive pricing, fulfilment, shipping subsidies, the Shopee VIP membership program and content.
• Sales and marketing expenses hit 3.6% of GMV, and management has set no firm limit on reinvestment, Maybank said.

That means profitability improves only gradually. Maybank now forecasts Shopee's adjusted EBITDA at $1.1 billion in FY2026, $1.8 billion in FY2027 and $2.9 billion in FY2028 — 0.7% of GMV rising to 1.3% by FY2028.

Competition stays on the watch list. Management reported no material impact from TikTok Shop's standalone app, but promotional activity by China's Temu and its parent PDD Holdings could add pressure. Shopee's long-tail assortment, seller relationships and logistics network provide some protection, Maybank said, and the platform keeps pushing into higher-frequency categories such as groceries and pharmaceuticals via instant delivery.

Why is Monee's loan growth a concern?

Monee's loans outstanding jumped 60% year on year to $12.6 billion in Q3, with nearly 44 million active credit users, up 28%. But the business is pivoting from rapid expansion toward credit quality and risk-adjusted returns, Maybank said.

The 90-day non-performing loan ratio rose to 1.3% in Q3 from 1% in Q2, reflecting weaker credit conditions and changes in product and geographic mix. In Brazil, repayment behavior weakened ahead of the country's election amid expectations of potential debt relief, plus inflation and consumption pressures. Thailand's tighter credit conditions prompted Monee to strengthen lending requirements and slow loan growth. Indonesia, Malaysia and the Philippines stayed relatively stable.

Off-Shopee exposure adds risk: personal cash loans and off-Shopee loans now account for about half the loan book, and off-Shopee SPayLater loans more than doubled to nearly 25% of the portfolio. Maybank noted Monee has less proprietary transaction data on customers outside the platform.

Maybank cut Monee's adjusted EBITDA forecasts by 3% to 8%, to $1.2 billion, $1.5 billion and $1.7 billion for FY2026 through FY2028, with projected margins reduced to about 21% from 23%. A potential Monee listing is not an immediate valuation catalyst — management has indicated a one-to-three-year timeframe, subject to market and regulatory conditions.

What about Garena and Sea Cloud?

Garena stayed resilient. Bookings rose 6% year on year to $890 million despite a high base, helped by the return of the Naruto collaboration and momentum in Arena of Valor. Maybank raised FY2026–FY2028 bookings forecasts by 4% but cut adjusted EBITDA forecasts by 4% to 14%, mainly due to an accounting change after a US Securities and Exchange Commission review. Under the revised treatment, Garena's Q3 adjusted EBITDA was $458 million.

Sea Cloud, the proposed enterprise AI business, will commercialize technology built internally across Shopee, Monee and Garena over the past two years. It won't compete with hyperscalers on computing infrastructure; it targets helping businesses deploy AI models, integrate proprietary data and manage AI applications. Maybank noted Sea has yet to secure an external enterprise contract, and the business model remains early stage. The pace of internal AI and infrastructure spending matters more: higher capex could weigh on free cash flow before Sea Cloud generates meaningful revenue.

Despite lower earnings forecasts, Maybank held its buy rating, saying the recent share price correction had sufficiently reflected the slower growth outlook and higher spending. Sea's strong balance sheet and cash generation, it said, still fund the AI and infrastructure buildout.