Sea Q4 Earnings Preview: Revenue Falls as Gaming Slumps and E-Commerce Battles
$Sea Ltd(SE)$
Based on analyst ratinngs, 14 analysts have provided ratings, with 50% recommending a 'Buy' and 50% suggesting a 'Hold'. The average target price is USD 50.36. The highest target price is USD 75, 55% above the current price.
E-Commerce Revenue Climbs Amidst Expansion and Holiday Boost
Based on predictions from Bloomberg, revenue for the e-commerce division rose 11% from the previous quarter, hitting S$ 3.24 billion.
Sea's e-commerce growth in the quarter was likely fueled by its integration with Shopee, utilizing AI technology, offering flexible payments, and improving affordability. The company's efforts to attract customers during the holiday season, by growing its market presence and enhancing its content offerings, probably also contributed to the strength of its e-commerce segment in Q4.
To maintain its market position against competitors like TikTok Shop and Temu, Sea has increased investments in Southeast Asian e-commerce, aiming to reignite sales growth following a period of moderation for profitability. However, this strategy may weigh on earnings, especially as the company expands its digital banking operations. Moreover, Sea's Q4 2023 performance likely mirrors the impact of macroeconomic headwinds, including inflation and higher interest rates.
Digital Entertainment: Gaming Division Faces Setback
According to Bloomberg forecasts, the digital entertainment sector's revenue fell by 43% YoY to S$ 745 million.
Sea's gaming division, Garena, has faced challenges. The market reacted negatively when its most popular video game Free Fire started to level off in revenue generation. The situation deteriorated when India banned Free Fire for 18 months, impacting Sea's performance and stock. Garena's Q3 2023 revenue dropped 36% from the previous year.
SeaMoney Drives Growth in Digital Financial Services
SeaMoney, Sea's fintech division, is its fastest-growing segment, with a 37% YoY revenue increase in Q3 2023, constituting 13% of Sea's total revenue. As forecasted by Bloomberg, the e-commerce sector's revenue experienced a YoY 24% increase, reaching S$ 656 million in Q4. SeaMoney leverages the customer base of sister companies Garena and Shopee to offer digital financial services and has recorded strong financial results, aided by the rising adoption of mobile wallets and the digitization of financial services.
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