Why Sea Limited Stock Plunged This Week
The company is focused on market share gains, while investors seem to want profits.
$Sea(SE.US$
Shares of Sea were taking a dive this week after the company posted disappointing results in its third-quarter earnings report. Sea posted a surprise loss in the quarter, adding to concerns about a lack of financial discipline.
Shares of Sea were taking a dive this week after the company posted disappointing results in its third-quarter earnings report. Sea posted a surprise loss in the quarter, adding to concerns about a lack of financial discipline.
Sea did not provide guidance, but comments from CEO Forrest Li in the press release seemed to indicate that profitability was not around the corner as he said, "In this current period, we will prioritize investing in the business to increase our market share and further strengthen our market leadership. " Pursuing market share will likely come at a cost to profitability.
What's next for Sea Limited?
Investors have already been doubting the strategy around Shopee, which lost $346.5 million in adjusted EBITDA in the quarter. Notably, Shopee's loss expanded in Asia, Sea's core market, which seems like a troubling sign. The company has been focused on expanding in Brazil and narrowed its losses there, but the company is facing stiff competition from $MercadoLibre(MELI.US$ and $Amazon(AMZN.US$ in that market.
At this point, investors have made it clear that they need to see profitability from Sea in order for the stock to go higher. The focus on market share gains, especially with revenue growing by just single digits, could end up pushing the stock even further down.
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dualipo : the market can be stupid like this...