Sea Dips 13.1% on Wider-Than-Expected Q4 Loss

Shares of Sea Limited (SE) declined 13.1% on Tuesday after the Singapore-based consumer Internet company reported mixed results for the fourth quarter of 2021.

Sea reported a net loss of $0.88 per share, wider than the Street’s loss estimate of $0.59 per share. The company had reported a loss of $0.87 per share in the same quarter last year.

Meanwhile, total revenues of $3.2 billion rose 105.7% year-over-year and surpassed analysts’ expectations of $2.91 billion. The strong performance of Digital Entertainment, along with e-commerce and other services, drove the overall results.

Revenues from Digital Entertainment increased 104.1% year-over-year to $1.4 billion. Bookings rose 6.8% year-over-year to $1.1 billion, and quarterly active users (QAUs) stood at 654 million, up 7.1% from the same quarter last year.

E-commerce revenue stood at $1.6 billion during the quarter, representing a rise of 89.4% year-over-year. Similarly, gross merchandise value (GMV) was up 52.7% to $18.2 billion.

During the quarter, the company witnessed strong growth in the adoption of SeaMoney’s offerings. The total payment volume for the mobile wallet came in at $5 billion, up 70.1% year-over-year. Additionally, quarterly paying users for mobile wallet services rose to 45.8 million.

Sea’s Chairman and CEO, Forrest Li, said, “As we look ahead, it is clear that consumer activities and experiences are increasingly converging online at the intersection of content, commerce, and community. We believe our ecosystem comprises a complete consumer tech and innovation stack that is distinctively relevant to the new opportunities being presented. Therefore, we will continue to focus on best positioning Sea in the long run to best serve the changing needs of fast growing digital-native generations.”

Guidance

For 2022, Sea projects to generate bookings for digital entertainment in the range of $2.9 billion to $3.1 billion. Revenue from e-commerce is anticipated between $8.9 billion and $9.1 billion, the midpoint of which reflects 75.7% growth from 2021.

Also, digital financial services revenue is expected to be between $1.1 billion to $1.3 billion, the midpoint indicating 155.4% year-over-year growth.

Analysts’ Recommendation

Following the results, Stifel Nicolaus analyst Scott Devitt maintained a Buy rating on the stock but decreased the price target to $200 (16.7% upside potential) from $300.

Devitt said, “We continue to see significant opportunity within eCommerce given the size of the company’s core market, though the Indian ban on Free Fire remains a significant headwind to Garena growth.”

“We are raising our GMV estimates reflecting better-than-expected eCommerce momentum and are lowering our adjusted EBITDA estimates given the expected decrease in the higher margin Garena business and the accelerated pace of investment,” he added.

Overall, the Street is bullish on the stock and has a Strong Buy consensus rating based on 9 Buys and 1 Hold. The average Sea price target of $263.60 implies 108.4% upside potential to current levels.

Bullish Bloggers

TipRanks data shows that financial blogger opinions are 89% Bullish on SE, compared to a sector average of 70%.

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