Insights

Why Sea Limited Stock Tumbled Again Today

What happened
Shares of Sea Limited (NYSE: SE) were getting crushed today as the Southeast Asian video game and e-commerce company was one of many high-growth, unproiftable companies to spiral lower as investors move to safer stocks in preparation for a higher-interest environment.
As of 3:23 p.m. ET, the stock was down 16.6%.
Image source: Sea Limited.

So what
There was no company-specific news out on Sea Limited, but heavy selling last week in sectors like e-commerce carried over this week as investors continue to react to a round of weak earnings reports in e-commerce and other sectors that shined during the pandemic. The Fed’s plans to raise interest rates by a half a percentage point also seem to be accelerating the rotation out of growth stocks.
Based in Southeast Asia, Sea Limited doesn’t do much business in the U.S., but since it is listed on a U.S. exchange, it’s still subject to the same market behavior as its peer stocks, and last week’s earnings reports from e-commerce companies like Shopify, Wayfair, Etsy, and Ebay showed that growth had essentially ground to a halt in the e-commerce sector as the pandemic tailwinds fade.
Sea Limited won’t report first-quarter earnings until May 17.
Now what
Unlike most e-commerce companies, Sea Limited’s business is anchored by the Garena digital video game brand, the maker of Free Fire, which is profitable. The company has used those profits to fund the expansion of its Shopee e-commerce business, and SeaMoney, its digital payments segment. 
In its fourth-quarter earnings report, the company showed no signs of slowing down, with revenue up 105.7% to $3.2 billion. However, the company reported an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $492.1 million with a loss of nearly $1 billion in the e-commerce segment.
As the market has become wary of high-growth, money-losing companies like Sea Limited, it’s not surprising to see the stock crashing. Keep an eye on its first-quarter results to see if management has begun to exercise more financial discipline in response to shifting market demands. 

Jeremy Bowman has positions in Etsy, Sea Limited, and Shopify. The Motley Fool has positions in and recommends Etsy, Sea Limited, and Shopify. The Motley Fool recommends Wayfair and eBay and recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy. –

What happened

Shares of Sea Limited (NYSE: SE) were getting crushed today as the Southeast Asian video game and e-commerce company was one of many high-growth, unproiftable companies to spiral lower as investors move to safer stocks in preparation for a higher-interest environment.

As of 3:23 p.m. ET, the stock was down 16.6%.

Image source: Sea Limited.

So what

There was no company-specific news out on Sea Limited, but heavy selling last week in sectors like e-commerce carried over this week as investors continue to react to a round of weak earnings reports in e-commerce and other sectors that shined during the pandemic. The Fed’s plans to raise interest rates by a half a percentage point also seem to be accelerating the rotation out of growth stocks.

Based in Southeast Asia, Sea Limited doesn’t do much business in the U.S., but since it is listed on a U.S. exchange, it’s still subject to the same market behavior as its peer stocks, and last week’s earnings reports from e-commerce companies like ShopifyWayfairEtsy, and Ebay showed that growth had essentially ground to a halt in the e-commerce sector as the pandemic tailwinds fade.

Sea Limited won’t report first-quarter earnings until May 17.

Now what

Unlike most e-commerce companies, Sea Limited’s business is anchored by the Garena digital video game brand, the maker of Free Fire, which is profitable. The company has used those profits to fund the expansion of its Shopee e-commerce business, and SeaMoney, its digital payments segment. 

In its fourth-quarter earnings report, the company showed no signs of slowing down, with revenue up 105.7% to $3.2 billion. However, the company reported an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $492.1 million with a loss of nearly $1 billion in the e-commerce segment.

As the market has become wary of high-growth, money-losing companies like Sea Limited, it’s not surprising to see the stock crashing. Keep an eye on its first-quarter results to see if management has begun to exercise more financial discipline in response to shifting market demands. 

Jeremy Bowman has positions in Etsy, Sea Limited, and Shopify. The Motley Fool has positions in and recommends Etsy, Sea Limited, and Shopify. The Motley Fool recommends Wayfair and eBay and recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.

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