Sea, owner of Shopee e-commerce platform, reports wider loss after Tencent cuts stake, Temasek and Bridgewater jump in
- Shares of Sea Limited tumbled after second-quarter loss widened, firm suspends guidance for e-commerce business citing macro risks
- Tencent cut its stake in the Singapore-based firm in January, while Temasek and Ray Dalio’s hedge fund bought last quarter
Its American depositary shares tumbled 14 per cent to US$77.43 in New York overnight. They have plunged 65 per cent so far this year, erasing US$80.5 billion of its market capitalisation and substantially eroding the fortune of its billionaire founder Forrest Li Xiaodong.
Singapore-based Sea Limited declined to provide a fresh guidance on its e-commerce revenue for the full year 2022, citing increasing macro uncertainties. The group in May slashed its guidance to as low as US$8.5 billion from US$8.9 billion in March.
“We are in an environment of increased macro uncertainty, with rising inflation, rising interest rates, local currency depreciations against the US dollar and ongoing reopening trends,” Li, the group chairman and chief executive, said on its earnings conference call. “We think the right thing to do in this time of continuing heightened macro volatility is to prioritise efficiency and self-sufficiency.”
CGS-CIMB analysts including Ong Khang Chuen downgraded the stock on Wednesday, lowering their target price to US$92 from US$150.
“The suspended guidance for Shopee signals that near-term [sales] growth could remain weak due to longer-than-expected stabilisation trends post reopening, higher inflation affecting consumer sentiment and currency headwinds from a stronger US dollar,” they said. The withdrawal of revenue guidance was surprising, they added.
The group, which also develops mobile games, is facing another headwind in the form of regulatory curbs, after India banned its popular Free Fire mobile game in February. It prompted Li to address its employees in March that the stock meltdown was a short-term pain as the group pursues growth over profitability.
If the market is right, the stock has the potential to nearly double over the next 12 months based on the US$149.21 consensus target of 27 analysts compiled by Refinitiv. That price target, however, has been scaled back from US$227.43 in March and US$394.63 in December.
Jefferies analysts including Thomas Chong maintained a buy rating on the stock, despite lowering their target price to US$110 from US$140 on Tuesday. They cited the company’s more conservative outlook in the second half.
“We expect GMV (gross merchandise value) continues to moderate in growth due to macro headwinds,” they added. Key risks include earlier-than-expected maturity of Free Fire, aggressive price wars in online shopping, and slower-than-expected monetisation of Shopee, they said in the report.