Sea Ltd stock jumped 41% after a renewed focus on profitability

The Sea Limited logo is displayed on the smartphone screen.

Rafael Henrique | Soba photos | Light Rocket | Getty Images

shares sea ​​ltd It jumped as much as 41% after Tuesday’s announcement of its third-quarter financial results, after the company said it would renew its focus on profitability rather than explosive growth.

Early morning Asian time, the stock was trading at around $62.70 in after-hours trading. Its previous closing came at $45.80.

said Forrest Lee, Chairman and CEO of Sea Group Limited.

Shares of Sea Ltd are down more than 70% since the start of the year. The company owns online shopping platform Shopee and gaming arm Garena, two of its main money-making divisions.

The company fell further into the red in the third quarter ended September, as its adjusted EBITDA loss widened to $358 million. This compares to a loss of $166 million in the same period last year. EBITDA is a measure of profitability that shows earnings before interest, taxes, depreciation, and amortization.

In an effort to stem losses, the Singapore-based tech giant has laid off more than 7,000 employees, or about 10% of its workforce, over the past six months, according to local media.

In September, its senior management also announced that it would forego salaries “until the company is self-sufficient”.

E-commerce, fintech are seeing revenue increase, but gaming is declining

Its e-commerce and financial services units saw EBITDA rise year-over-year for the third quarter ended in September, but it was more than offset by disappointing toy sales performance.

Shopee’s adjusted EBITDA loss was $495.7 million, an improvement of 27.5% year-over-year, “driven by strong growth and improved efficiencies in operating costs.”

“We are currently working on achieving breakeven adjusted EBITDA for Shopee overall by the end of 2023,” Lee said.

Loss EBITDA for its digital financial services unit, which includes Shopee Pay and buy it now, pay later service SPayLater, narrowed to $67.7 million, improving 57.4% year-over-year, “primarily driven by spend on Target sales and marketing of the mobile wallet business.”

Meanwhile, gaming arm Garena saw adjusted EBITDA decline 60% year-over-year to $289.9 million for the third quarter.

“Garena is planning to launch new games,” Lee told the media conference. The globally successful Free Fire struggled after the game was banned by India in early 2022.

The sea also fell that it Garena reservations for the full year 2022 are expected to be between $2.6 billion and $2.8 billion, compared to previous guidance of between $2.9 billion and $3.1 billion, due to “increased macro uncertainty.”

shrink expansion

Sea said it does not intend to provide any 2023 guidance for its business, given the ongoing macro uncertainty.

The Singapore-based company has faced several setbacks over the course of this year, including investor ones Tencent Holdings reducing its stake in the company, banning gaming app Free Fire from India, and closing Shopee operations in Latin America, including markets in Argentina, Chile, Colombia and Mexico.

The tech company also pulled out of India and France to focus on key markets in Brazil, Southeast Asia and Taiwan in March.

Sea Ltd.'s revenues exceeded.  In the first quarter estimates, but losses are widening

“Brazil continues to play a role in growth, and we will continue to invest in the market,” Lee said during the conference call.

After these setbacks and piling up billions in losses, I realized that chasing growth was not a sustainable strategy. Sea’s adjusted EBITDA loss for fiscal year 2021 was $593.6 million, compared to an adjusted EBITDA loss of $107 million in 2020.

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