Why Sea Soaring 12% Is Still Not Solving？
Indonesian Jakarta Post reported that the Indonesian government may release regulations on Tuesday regarding the sale of products on social media. This move aims to address the threat posed by e-commerce sellers using predatory pricing on social media platforms to Indonesia's offline market. Some officials specifically mentioned TikTok, which is owned by ByteDance.
Following this news, the stock price of $Sea Ltd(SE)$, which owns the Shopee platform, surged by approximately 12%. With TikTok's 325 million active users in Southeast Asia, including 125 million in Indonesia, this represents a significant market. TikTok has also countered this move by stating that forcing social media and e-commerce to separate into distinct platforms will hinder innovation and put Indonesian businesses and consumers at a disadvantage.
Will this news really bring opportunities for Shopee?
Shopee has been a platform that competes on pricing from the beginning, engraving low prices into its platform's DNA. One of its features, "Lowest Price Guaranteed," is similar to $JD.com(JD)$ 's low-price guarantee, where customers can apply for compensation if they find lower prices or better deals on other platforms. This pricing model clearly has a significant impact on offline businesses. However, the Indonesian government's focus may be more on TikTok, as it has more active users in Indonesia.
As for Sea, it has faced challenges since its Q2 financial report, continuously falling short of performance expectations. The company previously aimed for "burning cash for scale" in a high-inflation era and did not give up on the expectation of high growth for the company. Their previous "profit ahead of time" strategy, which involved reducing subsidies and promotions, ultimately had consequences for the growth of their business. Intense competition in Southeast Asia and declining overall consumer behavior have also contributed to their challenges.
EBITDA in the Q2 financial report did not meet market expectations, partly due to the strong turnaround from losses to profits in the previous two quarters, creating overly high expectations among investors. The management may need several more quarters to balance profit and scale.
Therefore, at present, short covering is the main reason for the single-day rebound yesterday, and the fundamental problems of the company have not been resolved.
Additionally, Southeast Asia's headquarters could face increased competition from Temu, a subsidiary of $Pinduoduo Inc.(PDD)$ , making the competition even fiercer.
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$京东(JD)$ 2019 levels with good earnings quarterly with consistent growth. JD raises the less compared to BABA and sells the most.
JD.com is trading 90% below its intrisinic value. From a pure valuation perspective, JD.com is the better deal. PDD business model is different than JD and more on par with Alibaba. Investors sometimes get overly excited about growth. Need to see the bigger picture.
The company is currently attempting to reverse the slowdown in sales growth amidst intensifying competition.
China tech is in the way up big while all others head lower. Rotation will be huge
Good