Sea Limited (NYSE: $SE) operates as a consumer Internet company, functioning across three key segments: Digital entertainment, E-commerce, and Digital financial services. The Digital entertainment segment is represented by Garena, which specializes in mobile and personal computer (PC) online games, and is involved in the development of mobile games for the global market.
Garena actively promotes eSports. The E-commerce segment is centered around the Shopee platform, a mobile-centric, social-focused marketplace that offers users a secure and convenient shopping experience. The platform integrates payment systems, logistics infrastructure, and comprehensive sales services.
Shopee facilitates the direct purchase and sale of products from manufacturers and third parties to buyers. The Digital financial services segment encompasses SeaMoney, providing a range of payment services and loans to individuals and businesses. SeaMoney also collaborates with third-party merchant partners, covering various consumption use cases.
Sea Plunges 22% After Unexpected Loss From Rising Competition
Sea Ltd. experienced a significant decline following an unexpected loss reported in the third quarter, attributed to heightened competition from Alibaba Group Holding Ltd. and ByteDance Ltd. on its home ground.
The stock witnessed a 22% drop in New York trading, erasing approximately $6 billion in market value, following the company’s announcement of a net loss of $149 million. This marked a sharp contrast to the $322 million profit recorded in the previous quarter, with analysts anticipating a profit of around $100 million.
CEO Forrest Li, addressing investors in a post-results call, expressed his belief that the company should make substantial investments now to establish a larger presence in its online retail segment, Shopee.
This strategic move aims to counter competition from ByteDance’s TikTok, Alibaba’s Lazada, and PDD Holdings Inc.’s Temu. Li emphasized that sacrificing short-term profits for this endeavor will position the business more favorably in the future.
Li noted, “The entrance of new players has intensified competition in our market,” without explicitly naming the new entrants. He stressed that investing in market share presently will contribute to the company’s long-term strength.
$SE Plunges as Adjusted Ebitda Misses Estimates: Street Wrap
Sea exceeded analysts’ forecasts for revenue growth, with sales climbing by 4.9% in the quarter to reach $3.3 billion, surpassing the average estimate of $3.2 billion.
Recently, Sea’s key markets, including Indonesia, faced competition from TikTok and emerging video-oriented shopping services leveraging popular influencers to engage a growing online audience. However, in September, Jakarta compelled TikTok to shut down its shopping service in response to a rising backlash from smaller merchants against the Chinese-owned platform.
Since this development, investors have been seeking indications of Sea’s potential resurgence. Prior to the closure of TikTok’s shopping service in Indonesia, concerns lingered that the Singaporean company, which had reported over a decade of losses since its founding in 2009, might return to negative financial performance.
The situation is further complicated by expectations that Southeast Asia’s internet economy will experience its slowest growth on record this year, influenced by an economic downturn with uncertain outcomes.
Is Sea (NYSE:SE) Using Debt In A Risky Way?
In line with Warren Buffett’s famous quote, “Volatility is far from synonymous with risk,” our assessment of a company’s risk considers its use of debt, as excessive debt can pose a threat to its stability. Sea Limited (NYSE: SE) carries debt on its balance sheet, raising the question of whether this indebtedness contributes to the company’s overall risk.
While debt serves as a tool for business expansion, a company that struggles to meet its debt obligations puts itself at the mercy of lenders. In such cases, if the company fails to fulfill its legal commitments to repay debt, shareholders may face the risk of receiving little to nothing in return.
Although this scenario is not commonplace, instances occur where heavily indebted companies resort to raising capital at distressed prices, leading to permanent dilution for shareholders.
Nonetheless, many companies manage their debt responsibly, leveraging it to their advantage. In evaluating a company’s use of debt, our initial focus is on assessing the interplay between cash and debt.
What is the intrinsic value of Sea Ltd?
As of today (2023-11-06), Sea’s projected Free Cash Flow (FCF) intrinsic value is $9.34, while the stock price is $44.79. Consequently, Sea’s Price-to-Intrinsic-Value-Projected-FCF ratio today stands at 4.8.
What is $SE Limited price target?
Sea’s 12-month average price target stands at $65.57, indicating an upside potential of 46.98%, according to analysts’ assessments.
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