Key Takeaways
- SCGE Management, a firm that manages $10.4 billion, sold all of its Sea and ServiceTitan shares in the third quarter, its latest 13F shows.
- Since Sept. 30, Sea stock has fallen 21% and ServiceTitan stock has risen 17%.
- In the same quarter, the fund opened a MercadoLibre position and added 65% to its Snowflake shares.
- Sea trades at about 18x forward earnings after growing revenue 43% last quarter, so it looks too cheap to sell, while ServiceTitan’s 17% upside at about 56x makes its sale easier to defend.
A firm that manages $10.4 billion just cleared two stocks out of its portfolio.
SCGE Management sold every share it held of Sea (SE) and ServiceTitan (TTAN) in the third quarter, according to its 13F for the quarter ended Sept. 30, filed Nov. 13. In the same quarter, it opened a position in MercadoLibre (MELI), which competes with Sea’s Shopee for Brazil’s online shoppers, and added to its Snowflake (SNOW) stake.
Sea is off the books
At June 30, SCGE held 1.77 million Sea shares worth $170 million, 2.9% of its 13F stocks. By Sept. 30, it held none. Sea stock has fallen 21% since then and sits 49% below its 52-week high. The stock has fallen even though the business is doing well: on Nov. 10, Sea reported third-quarter revenue up 43% to $8.6 billion, and Shopee had its most profitable quarter ever.
ServiceTitan went the other way
SCGE held 1.23 million ServiceTitan shares worth $87 million at June 30, 1.5% of its 13F stocks, and none by Sept. 30. Since then, ServiceTitan stock has gained 17%, though it’s still 26% below its 52-week high. Those moves only track the stock price: a 13F shows what a fund held on the last day of each quarter, so it doesn’t say what SCGE got for either stock.
TIKR tracks 27 analysts on Sea. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Sea, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Sea’s Analyst Ratings
Sea looks too cheap to sell
Analysts have spent the year cutting their Sea targets. The consensus target has slid from $193 last November to $134.50 today:
Even after those cuts, the average target from 27 analysts sits 78% above the last close, and Sea trades at about 18x forward earnings. That’s a low multiple for a company that just grew revenue 43%, and Sea’s board approved a new $1 billion buyback with the results.
The catch is profit. Sea’s adjusted EBITDA rose 29% to $931 million in the third quarter, well behind sales. And the lowest target on the Street, $70, is below today’s price.
Sea says Brazil was again Shopee’s fastest-growing market in the third quarter, and that’s where SCGE’s new money went too. It bought 70,000 MercadoLibre shares worth $121 million, making it the fund’s No. 9 position at 2.5% of its 13F stocks. The fight is costing MercadoLibre as well. Its operating margin fell to 6.3% in the third quarter from 9.8% a year earlier, and management has accepted a lower margin to defend its lead. MercadoLibre stock is down 14% since Sept. 30, a smaller drop than Sea’s.
ServiceTitan has less room to run
Analysts have been cutting ServiceTitan’s targets too. Its consensus target has fallen from $136 a year ago to $96.81:
That average, from 18 analysts, is just 17% above the last close, and the stock trades at about 56x forward earnings. The top target has come down too, to $110 from $155 a year ago. After a 17% run since Sept. 30, there isn’t much upside left on the Street’s math.
SCGE was still buying software, though. It added 65% to its Snowflake shares, taking them to 331,900 shares worth $113 million, or 2.3% of its 13F stocks. Snowflake is down 14% since Sept. 30, but analysts have gone the other way: their average target has risen to $427.33 from $267 a year ago, 47% above the last close. At about 115x forward earnings, Snowflake’s early-December report has to show its AI-driven growth sticks.
Sea is the one I’d keep
The risk with Sea is that the fight in Brazil keeps its profit growing slower than its sales for a while. But at about 18x forward earnings, with revenue up 43% and the Street’s average target 78% above the price, I think the market has priced in plenty of that. ServiceTitan is the easier sale to defend: 17% upside at 56x forward earnings doesn’t leave much room for error.
So of the two stocks this fund dumped, Sea is the one I’d buy today. ServiceTitan reports in early December, which will show whether its targets have stopped falling. SCGE’s next 13F is due by mid-February and will show whether it’s still building its MercadoLibre and Snowflake positions.
So what is Sea stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
