Shares of Southeast Asian e-commerce and gaming company Sea Group surged after its first-quarter earnings beat analysts’ expectations on Tuesday.
Sea’s U.S.-listed shares rose 14% to close at $80.21 after the Singapore-based internet company reported earnings that beat analysts’ expectations in the first quarter of this year.
Here’s how the NYSE-listed company fared from January to March:
- Revenue: $2.9 billion vs $2.76 billion as expected by analysts, according to Refinitiv.
- Net loss: $580.1 billion versus $722 billion as forecast by analysts, according to Refinitiv.
Sea’s revenue increased 64.4% from the same period a year earlier, but fell about 9.5% from $3.2 billion in revenue of the previous quarter, a sign that after two years of pandemic-related sales, growth is beginning to level off.
Its online shopping platform Shopee and gaming arm Garena grew more slowly as countries opened up.
Singapore, Singapore – 2021: A large Shopee logo at the entrance to the e-commerce platform headquarters in Science Park. (Exact date of photograph unknown due to incorrect camera settings)
Kokkai | Istock Unpublished | Getty Images
The company warned that inflation and supply chain disruptions could affect the business, even if it continues to be loss-making.
“As we enter a new period, we recognize that the current macroeconomic trend and uncertainties could affect our region and the world in the short term,” said Forrest Li, CEO and co-founder of Sea, during the call. to the results.
Shopee and Garena, Sea’s two main money-making divisions, reported lower revenue than the previous quarter.
E-commerce revenue generated by Shopee was $1.52 billion in the first quarter, compared to $1.59 billion in the prior quarter. Heavy logistics and marketing spending resulted in losses of $810 million, down $131 million from the prior quarter.
The company revised its full-year revenue forecast for Shopee to between $8.5 billion and $9.1 billion, citing “high macroeconomic uncertainties.”
Sea chief executive Yanjun Wang stressed that the company was not lowering its forecast, but widening it as a precaution. Its previous forecast was between $8.9 billion and $9.1 billion.
But the amount people spend on each order may be trending down, according to Kristine Lau, an analyst at research firm Third Bridge.
“The impact of inflation on discretionary spending is one,” she said, referring to non-essentials such as entertainment and luxury goods.
“For a lot of high frequency items or just daily necessities that people needed to buy online – either it was out of stock offline or it made more sense to use Shopee when everything is locked down – I think that a lot of that would be reallocated to offline retail,” Lau added.
Garena, which has long been the source of Sea’s profits, recorded sales of $1.1 billion. Net income for the games business was up 52.2% (or $432 million) from the same period a year ago, but down 23.5% (or $859 million) from in the previous quarter
Quarterly active users fell by 32.9 million year-over-year, while quarterly paid users fell by more than 18 million to 61.4 million from 79.8 million a year ago. which aligns with concerns that demand for mobile games is now weaker in a post-pandemic world. .
Much of the loss could also be attributed to a ban in India. Earlier this year, India blocked Garena’s hit mobile game Free Fire, along with 53 other China-related apps.
Chinese tech giant Tencent is one of Sea’s largest shareholders. In January, Tencent sold $3 billion worth of Sea shares, reducing its stake from 21.3% to 18.7%.
Sell the technology
Sea shares were hammered by the massive sale of technology. Its stock has fallen more than 80% since its October 2021 high, when it hit $366.99. Prices fell to a two-year low of around $57 earlier this month.
Investors are also concerned about its money consumption pattern. Sea has spent hundreds of millions, if not billions, of dollars each quarter on marketing, particularly in subsidies to attract consumers and merchants to Shopee, which competes with Amazon, Alibaba’s Lazada in Southeast Asia. , and Mercado Libre in Latin America.
Shopee operates in 13 countries and can be found in Southeast Asia, Latin America, and Europe. It pulled its Shopee business from India and France in March this year, just months after venturing into both countries.