Long term play
$Sea Ltd(SE)$is a promising company. And their main market is in a rapidly growing one compared to the already matured market the US is. And what makes them unique is the 3 different pillars they have which is gaming, e-commerce and digital banking. If they can leverage these and scale, they might be a powerhouse of the future.
However, being a growing company, they needto grow market share and create brand stickiness. This they try to do with their Shopee brand in e-commerce. They have strong competition though from Lazada and not forgetting powerhouse Amazon as well as Mercado Libre. It is not a secret however that they are not profitable yet and rely on their cash cow Garena to keep up with their cash burn.
As we know, Garena is slowing down especially after the pandemic tides over and people get back to real life. So they do not have that much cash to burn anymore if they want to stayafloat. I believe they made a call too bold when they tried to penetrate too many markets at one time.
After they made their name in SEA (pun intended!) region, they grew bold and entered the South American market where they had considerable success. This emboldened them and they pushed into Europe. They were doing quite ok at some point of time especially during the pandemic. However they showed signs of cracking under pressure when they started pulling out of France and then others. It shows guile and willingness to withdraw before it is too late but management should have been more forward looking and not waste valuable resources. Instead they should have concentrated their efforts in regions where they are already successful and made it really theirs!
So I believe that explains the free fall of their shares besides the fact that growth shares were no longer in vogue with rising rates.
In this climate, investors are looking towards free cash flow and strong balance sheets. There are just too many companies on sale especially with stronger FCFs and balance sheets forthe available money and investors are being discretionary in their choices now.
That is my take on Sea. If they can show an improvement in both top and bottom lines as well as resuming growth, that is when investors will take note and their share prices will pickup.
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