Sea Limited's (NYSE:SE) Q1 Earnings Results: Revenue In Line With Expectations But Stock Drops

Anthony Lee /
2023/05/16 6:36 am EDT
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E-commerce and gaming company Sea Limited (NYSE:SE) reported results in line with analyst expectations in Q1 FY2023 quarter, with revenue up 4.88% year on year to $3.04 billion. Sea Limited made a GAAP profit of $88.1 million, improving on its loss of $580.1 million, in the same quarter last year.

Is now the time to buy Sea Limited? Access our full analysis of the earnings results here, it's free.

Sea Limited (SE) Q1 FY2023 Highlights:

  • Revenue: $3.04 billion vs analyst estimates of $3.04 billion (in line)
  • EPS: $0.15 vs analyst estimates of $0.41 ($0.26 miss)
  • Free cash flow of $605.5 million, up 89.4% from previous quarter
  • Gross Margin (GAAP): 46.6%, up from 40.4% same quarter last year
  • Quarterly paying users: 37.6 million, down 23.8 million year on year

“The first quarter of 2023 was another strong quarter for us,” said Forrest Li, Sea’s Chairman and Group Chief Executive Officer.

Founded in 2009 and a publicly-traded company since 2017, Sea Limited (NYSE:SE) started as a gaming platform and has since expanded to offer a variety of services such as e-commerce, digital payments, and financial services across Southeast Asia.

Marketplaces have existed for centuries. Where once it was a main street in a small town or a mall in the suburbs, sellers benefitted from proximity to one another because they could draw customers by offering convenience and selection. Today, a myriad of online marketplaces fulfill that same role, aggregating large customer bases, which attracts commission paying sellers, generating flywheel scale effects which feed back into further customer acquisition.

Sales Growth

Sea Limited's revenue growth over the last three years has been incredible, averaging 79.8% annually. This quarter, Sea Limited reported a rather lacklustre 4.88% year on year revenue growth, in line with analysts' expectations.

Sea Limited Total Revenue

Ahead of the earnings results the analysts covering the company were estimating sales to grow 9.49% over the next twelve months.

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Usage Growth

As a online marketplace, Sea Limited generates revenue growth both by growing the number of users on the platform and the average user size in dollars.

Sea Limited has been struggling over the last two years as the number of paying users, a key usage metric for the company, declined 7.02% annually to 37.6 million. This is one of the lowest levels of growth in the consumer internet sector.

Sea Limited Quarterly paying users

In the number of paying users decreased by 23.8 million, a 38.8% drop year on year.

Key Takeaways from Sea Limited's Q1 Results

With a market capitalization of $49.9 billion, more than $6.59 billion in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

We struggled to find many strong positives in these results. On the other hand, there was a decline in number of users and the revenue growth was quite weak. Overall, this quarter's results could have been better. The company is down 5.01% on the results and currently trades at $83.7 per share.

Sea Limited may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.