Why Sea (SE) Shares Are Plunging Today

Radek Strnad /
2024/05/28 12:37 pm EDT

What Happened:

Shares of e-commerce and gaming company Sea (NYSE:SE) fell 8.3% in the pre-market session after Bloomberg reported that Indonesia's antitrust authorities are investigating the company for "potentially unfairly favoring its own delivery service over other alternatives." According to the concerns, Shopee's (Sea's e-commerce platform) algorithm tends to favor the company's services over other options when buyers choose how their purchases are delivered. The antitrust agency noted that "...Shopee International Indonesia has discriminated in the selection of shipping service companies that are automatically activated in bulk on the seller dashboard." A Shopee Indonesia spokesperson responded, stating "the company is committed to complying with all applicable regulations and legislation in the Republic of Indonesia."

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What is the market telling us:

Sea's shares are quite volatile and over the last year have had moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 3 months ago, when the stock gained 16.6% on the news that the company reported fourth-quarter results that narrowly topped analysts' revenue and adjusted EBITDA expectations. Notably, the company announced the first full year of annual profit since its IPO. The company noted that despite growing competition in the e-commerce market in South East Asia, Shopee (SEA's e-commerce business) is gaining market share. As a result, the company expects Shopee's full-year GMV growth to be in the high teens range and its adjusted EBITDA to turn positive in the second half of this year. 

Despite a challenging macro environment, SeaMoney (SEA's fintech operation) recorded the first year of positive profit in 2023. Finally, Sea's game studio, Garena, recorded huge success with Free Fire, one of its published games, emerging as the most downloaded mobile game globally, according to Sensor Tower. Overall, this was a solid quarter for Sea, given the beat on adjusted EBITDA and profitability and the reassuring outlook.

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