Speaking of wild rides, let’s talk about Singapore-based internet services company Sea Ltd. The stock experienced a meteoric rise during the pandemic but has been plummeting since, with its decline continuing today. 📉
That’s because it surprised the market with a third-quarter loss of $0.26 on $3.31 billion in revenues. While revenues were about 5% better than expectations, analysts had anticipated $0.12 per share in earnings from the company. 🙃
For the last three quarters, it has reported a profit by focusing on cost-cutting and operational efficiencies. However, it performed a 180 in the current quarter, prioritizing investing to increase its market share and further strengthen its leadership position.
While investing in growth is important, the market has been rewarding companies that prioritize profitable growth plans. Based on the current quarter, it’s clear the company hasn’t found that balance yet. Additionally, investors remain concerned about the growing competition in Asia’s digital entertainment, e-commerce, and financial services industries. ⚔️
Roughly two-thirds of its revenues come from e-commerce, but Shopee has seen growing competition from major platforms like TikTok, Shein, and Temu. On top of that, China’s economic recovery has dampened domestic growth, forcing these companies to expand internationally to sustain their momentum. That’s a gamble that often takes several quarters or years to pay off. 🛒
Its executives argue that investing now to cement their market share position will position them well for the inevitable industry consolidation. Still, investors worry about the firm’s history of losses and ability to achieve even a fraction of its pandemic-era growth.
As a result, $SE shares remain “lost at sea,” so to speak. They fell an additional 22% today and are sitting at levels first seen in mid-2019. ⏪