Share prices of Sea Ltd., one of Southeast Asia’s leading tech companies, experienced a sharp decline after falling short of revenue expectations and announcing a shift towards prioritizing growth over profits. This strategic pivot is seen by analysts as a move to defend the company’s market share in the face of increased competition. Sea reported lower-than-expected revenue of $3.1 billion compared to the anticipated $3.2 billion. Despite this, Sea’s chairman and CEO, Forrest Li, stated that the company has achieved self-sufficiency and is now in a stronger position to reaccelerate investments in growth. The stock plummeted by 28% following this earnings report.
In contrast to its recent cost-cutting efforts, Sea had previously focused on profitability, responding to investor pressure amid high inflation and interest rates. Regional tech giants like GoTo and Grab had implemented similar cost-saving measures through mass layoffs and reduced customer incentives. Sea’s top management team even gave up their salaries, while the company froze salaries and provided lower bonuses to most employees. Local media reports indicated that Sea had laid off more than 7,000 employees within six months. However, Sea turned things around and achieved positive net income in the fourth quarter of 2022, remaining profitable since then.
Sea’s CEO, Li, announced that the company will increase its investments in growing the e-commerce business across its markets. These investments may involve costly shipping subsidies and discount vouchers, as suggested by JPMorgan analysts. Sea faces competition from Lazada and TikTok Shop, which has led the company to spend more in order to maintain its market share in the region. Shopee, a subsidiary of Sea, currently holds the market leader position with a gross merchandise volume (GMV) of $47.9 billion in 2022, while Lazada’s GMV is $20.1 billion in the same year.
JPMorgan analysts expressed concerns about the impact of Sea’s increased investments on its earnings. As a result, JPMorgan downgraded Sea’s rating from “overweight” to “neutral” with a price target of $40.50. However, Sachin Mittal, head of telecom, media, and technology research at DBS Bank, remains optimistic about Sea’s strategy, emphasizing the importance of defending market share in the e-commerce industry. Mittal believes that Sea’s focus on market share defense is the right approach, adding that TikTok Shop is not a significant threat to Shopee due to its reliance on third-party players for e-commerce packaging. In contrast, Shopee and Lazada have their own logistics networks, giving them a competitive advantage.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
