Sea Ltd. Plunges After Surprise Loss Amid Intensifying Competition
In a shocking turn of events, Sea Ltd. saw its stock plummet by 22% in New York trading, wiping out approximately $6 billion in market value. This comes after the company reported a net loss of $149 million in the third quarter, a stark contrast to the $322 million profit it posted in the previous quarter. Analysts had forecasted a profit of around $100 million for the e-commerce and gaming company.
Chief Executive Officer Forrest Li attributed the unexpected loss to the intensifying competition from major players such as Alibaba Group Holding Ltd. and ByteDance Ltd. in its home market. Li emphasized the need for heavy investments to build scale in the company’s online retail arm Shopee to stay competitive against rivals like TikTok, Lazada, and Temu.
While Sea did exceed analysts’ expectations for revenue growth, with a 4.9% increase to $3.3 billion in sales, the company’s decision to prioritize long-term growth over short-term profit was met with mixed reactions.
The company’s gaming division, centered around Garena, has also faced challenges with a lack of new blockbuster titles. However, Sea recently announced plans to restore its marquee title Free Fire to Indian app stores after a ban in 2022.
With the entrance of new players intensifying competition in Sea’s key markets, investors have expressed concerns about the company’s ability to maintain profitability. Southeast Asia’s internet economy is expected to log its slowest growth on record this year, adding further pressure on Sea to navigate the increasingly crowded and competitive landscape.
The company’s aggressive investments in Shopee and cost-cutting measures earlier in the year have demonstrated Sea’s commitment to achieving profitability. However, the recent setback has raised questions about the company’s ability to sustain its growth trajectory in the face of fierce competition and shifting market dynamics.
As Sea continues to grapple with evolving market conditions and growing competition, the path to profitability and sustained growth remains uncertain for the Singapore-based company.
©2023 Bloomberg L.P.