Wednesday afternoon’s trading session proved to be a wild ride for Sea Limited (NYSE:SE). It kicked off Wednesday down over 3%, following a plunge on Tuesday. But by Wednesday afternoon, Sea Limited rolled back up into positive territory, though just up fractionally. So what sent the interactive home entertainment stock on such a roiling ride? The potential for a “brutal battle” over market share to come may be to blame.
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The whole thing started for Sea Limited with its earnings report, released on Tuesday. It was a mixed-bag earnings report, which seldom does great things for share prices, even if it doesn’t always hurt them that badly. Sea Limited posted earnings of $0.54 per share, which beat analyst expectations of $0.46 pretty nicely. Revenue, however, was where the sticking point came in. While the $3.1 billion in revenue it turned in was up 5.2% against the second quarter of 2022, it was also short of the $3.25 billion that analysts were expecting.
That hit, though, was enough for Citi to reconsider its stance, as analyst Alicia Yap lowered Sea Limited’s rating from Buy to “neutral.” She also cut her price target from $98 to $50, nearly cutting it in half. Yap foresees a lot of competition coming into Sea Limited’s market, suggesting that the company would soon face a “brutal battle” to maintain market share and keep invaders out of its pool. While management had the right idea about reinvesting profits into the company, Yap noted, there wasn’t much visibility about how well the plan was working. That has investors increasingly unnerved.
However, for the most part, analysts are on Sea Limited’s side. With 11 Buy ratings and three Hold, Sea Limited stock is considered a Strong Buy. Further, with an average price target of $83.27, Sea Limited stock offers investors a spectacular upside potential of 104.14%.
