Investing.com -- JP Morgan downgraded Sea Ltd (NYSE:SE) to “Neutral” from “Overweight,” flagging heightened macroeconomic headwinds and an uncertain outlook for the region’s internet sector, while retaining its preference for ride-hailing and food delivery firm Grab.

The brokerage cited trade tensions and tariffs as potential drags on growth for tech companies operating in export-reliant economies like Vietnam, Thailand, Singapore and Malaysia.

JPM warned of negative growth shocks from the tariffs, with particular pressure on consumer demand and digital advertising.

Sea’s shares have surged 244% since their January 2024 lows, outperforming the broader Nasdaq’s 13% gain, driven by sharp earnings upgrades.

However, JP Morgan believes the rally may be running out of steam. It cut its price target on Sea to $135 from $150, citing risks to gross merchandise value (GMV) growth and credit costs at its fintech arm SeaMoney.

Macro (BCBA:BMAm) headwinds and softer consumer spending could weigh on ad spend and GMV growth, JP Morgan said, adding that seller commission hikes may also slow.

The brokerage trimmed its FY25/26 adjusted EBITDA estimates for Sea by 5%, led by its ecommerce and fintech operations.

Grab, by contrast, was viewed as more insulated from macro risks due to its exposure to an affluent user base and positive alternative data showing continued market share gains.

JP Morgan maintained its “Overweight” rating on Grab but trimmed its price target to $5.3 from $5.5, citing modest cuts to earnings forecasts.

The firm expects Grab to report first-quarter adjusted EBITDA of $96 million, up 55% year-over-year, on group revenue of $758 million. Sea’s first-quarter EBITDA is forecast at $700 million, a 75% rise from a year earlier.

JP Morgan noted potential upside risks include policy rate cuts, which could improve valuation multiples, and market share gains by Shopee, Sea’s ecommerce unit.

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