(Bloomberg) — Sea Ltd. experienced a downturn in the third quarter, with increased competition from Alibaba and TikTok contributing to a net loss for the company.
The stock plummeted 13% in early New York trading, marking the most significant intraday decline in three months. Sea reported a net loss of $149 million, down from a profit of $322 million in the previous quarter. Sales rose by 4.9% to $3.3 billion from the same period a year earlier, surpassing the average estimate of $3.2 billion.
Concerns have arisen about Sea’s ability to maintain margins in the face of competition from TikTok, Alibaba’s Lazada, and newcomers like Temu. The company’s founder announced plans to bolster online retail and live-streaming to appeal to younger shoppers, leading to a more substantial loss than anticipated.
Sea’s primary markets, including Indonesia, have seen fierce competition from TikTok and similar platforms. The abrupt exit of TikTok’s shopping service from Indonesia has left investors wondering about Sea’s future prospects in the region.
Sea’s gaming division, centered around Garena, has experienced a decline due to a lack of new blockbuster titles. However, the company announced plans to restore its popular title Free Fire to Indian app stores after a temporary ban.
Marketing costs surged 12.4% year over year in 3Q, posing challenges for Sea as it aims to entice shoppers and live-streamers to drive top-line growth.
Li’s company had made efforts earlier in the year to focus on profitability, embarking on a cost-cutting drive to reach profit and investing in the e-commerce arm Shopee. The company has faced competition not only from Alibaba and ByteDance but also local rivals such as GoTo Group, owner of Indonesian e-commerce contender Tokopedia.
(Updates with comment from analyst in fourth paragraph)
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