To The Moon

​$Sea Ltd(SE)$ 22Q1 earnings' released, both revenue and profit beats, surging 13% post market. It is still 65% plummet YTD due to oversold

• Q1 revenue $2.9 billion, +64.4% YOY, beats consensus $2.77 billion;
• Gross profit $1.17 billion, +81% YOY, beats consensus $990 million;
• Non-GAAP Net loss $445 million compared with $320 million last year, consensus $659 million;
• EBITDA was loss $509.9 million, in line consesus, compare to a profit of $88.1 million last year.

The e-commerce drags, but not that perssimistic

• The single-quarter revenue was 1.5 billion US dollars, a year-on-year increase of 64.4%, which was lower than the market expected consensus of 1.7 billion US dollars;
• The total order was 1.9 billion, a year-on-year increase of 71.3%, which was lower than the market expected consensus of 2 billion US dollars;
• The total amount of commodity transactions (GMV) was US $17.4 billion, a year-on-year increase of 38.7%, which was lower than the market expectation of US $1.95 billion;

Sea's e-commerce platform Shopee is showing high user baseand increasing gross margin. The increaseinng gross margin is mainly due to the increase in the proportion of advertising and other value-added services business.

At the same time, Shopee's App ranks first in terms of average monthly active users and total application time spent in Southeast Asia, and Brazil, and it is also 2022Q1 is the highest ranked application in the shopping category by download volume worldwide.

It is never too surprised by Shopee's popularity. $Amazon.com(AMZN)$, $Shopify(SHOP)$​, $MercadoLibre(MELI)$ presented pessimistic expectation of online e-commerce businees previously, which made investors sell out. the whole industry.

Although Shopee's annual revenue guide has been tweaked from 8.9-9.1 billion US dollars to a wider 8.5-9.1 billion US dollars, Shopee and Amazon are not in same conditions. Most of all, AMZN's largest trading markets are North America and Europe, while Shopee is Southeast Asia and Brazil. Both places gradually recovered from the pandemic, the larger user base and lower logistics cost in Southeast Asia have made the growth of online e-commerce easier and more stable. To be short,  North America is facing   a worse scenario . 

Therefore, Shopee's should be better than AMZN, Ebay and SHOP, and the market's correcting its pessimism.

The revenue of digital entertainment business exceeded expectations

• Single-quarter revenue was US $1.1 billion, up 45.3% year-on-year, exceeding the expected consensus of US $927 million.
• The number of quarterly active users reached 616 million,It was 648.8 million in the same period last year, up nearly 24% year-on-year, higher than the expected 575 million
• The quarterly paying users reached 61.4 million, and the proportion of paying users was 10.0%, which was lower than 12.3% in the same period of last year and higher than 8.9% in the same period of 2020.
• EBITDA was $431 million, down 40% year-on-year, but exceeded the expected $420 million.

The main factor is the self-developed global popular game "FreeFire", which is still the most downloaded mobile game in the world in Q1. India's ban did not have a great impact.

Of course, although SEA's game business cannot always beats, there are still two problems:

1. whether the games hatching in studios can successfully be the next"FreeFire",

2. whether they can continue to attract users after pandemic?

Digital financial services business highlights

• Revenue was US $236 million, up 360% year-on-year.
• Total mobile wallet payments reached US $5.1 billion, an increase of 48.5% over the same period of last year.
• Quarterly active activity reached 49 million, a year-on-year increase of 78%.

Promotion in Indonesia is the most advanced, and Shopee Malaysia recently obtained the digital banking license, also, it is expected to be extended to the Philippines this year and further expand its market share in Brazil.

SeaMoney continues to expand in the vertical market of non-payment fields such as credit, insurance technology and wealth management.

On the whole, SE still gets high growth under the current market, which obviously brings more confidence to investors.

However, stock price still needs saving, and it's more complicated. SEA can make up for the previous oversold in short term, but still difficult to change the long-term investors' rolling over of market style.