Sea Stock Dips Then Recovers on Q1 Earnings

Southeast Asian tech giant Sea Limited (NYSE: SE) reported first-quarter earnings on Tuesday morning and investors were initially disappointed since the results missed expectations. The stock opened approximately 7% lower before recovering. As of 12:30 p.m. EST, shares were up 3%.

Here’s how Sea fared in the first quarter.

Triple-digit growth across the business

Total revenue in the first quarter soared 147% to $1.76 billion, narrowly missing the consensus estimate of $1.81 billion in sales. That resulted in an adjusted net loss per share of $0.52, also slightly worse than the $0.46 per share in adjusted losses Wall Street analysts were modeling for.

Sea’s Digital Entertainment business, which primarily includes mobile gaming, saw quarterly active users (QAUs) jump 61% to 648.8 million. Of those, 79.8 million were quarterly paying users, or roughly 12% of QAUs. Average bookings per user were $1.70, up from $1.30 a year ago. The company’s internally developed game Free Fire remains the highest grossing mobile game in several major markets, including Latin America, Southeast Asia, and India. Bookings in the Digital Entertainment segment came in at $1.1 billion.

The e-commerce business saw gross merchandise volume (GMV) more than double to $12.6 billion, translating into $922.3 million in revenue. Gross orders increased 153% to 1.1 billion, and Sea’s Shopee platform was the top shopping app in Southeast Asia and Taiwan during the quarter when measuring average monthly active users and total time spent in the app. 

While the two core businesses are putting up stellar growth rates, Sea continues to expand its Digital Financial Services offerings, with SeaMoney enjoying higher adoption. Total payment volumes for the company’s mobile wallet topped $3.4 billion, and quarterly paying users of Sea’s mobile wallet services were 26.1 million.

Sea also disclosed that it issued 4.8 million new shares in recent months, between March 5 and May 10, in order to settle conversions related to outstanding convertible notes. That event will be dilutive, but also effectively extinguish some debt and will result in interest savings. The company now has 524.4 million shares outstanding.

Ongoing uncertainties from COVID-19

Sea did not provide an update for its annual guidance due to ongoing macroeconomic uncertainties related to the COVID-19 pandemic. Many of Sea’s most important markets in Asia are grappling with worsening conditions and rising case numbers, particularly India. The company continues to closely monitor local trends, according to exec Yanjun Wang, and will provide investors with an updated outlook once Sea is ready.

In March, Sea issued full-year 2021 guidance that calls for Digital Entertainment bookings of $4.3 billion to $4.5 billion, which represents 38% growth at the midpoint. The e-commerce segment should generate $4.5 billion to $4.7 billion in revenue this year.

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Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Sea Limited. Millennial Money is part of The Motley Fool network. Millennial Money has a disclosure policy.

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