Shopee and Garena report high earnings

Singapore, Singapore – 2021: Large Shopee logo at the entrance to the e-commerce platform headquarters in Science Park. (Exact photo date unknown due to incorrect camera settings)

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Shares of Southeast Asian e-commerce and gaming company Sea Group surged after its first-quarter revenue beat analysts’ expectations on Tuesday.

US-listed Sea shares rose 14% to close at $80.21 after the Singapore-based internet company reported earnings that beat analysts’ expectations in the first quarter of this year.

Here’s how the New York Stock Exchange-listed company performed between January and March:

  • Income: $2.9 billion vs. $2.76 billion analysts had expected, according to Refinitiv.
  • Network Loss: According to Refinitiv, $580.1 billion versus $722 billion analysts had expected.

Sea’s revenue rose 64.4% from the same period a year earlier but fell about 9.5% from the $3.2 billion it generated in the previous quarter, a sign that after two years of sales, caused by the pandemic, growth is starting to stabilize.

Online shopping platform Shopee and gaming division Garena grew at a slower pace as countries opened up.

The company warned that inflation and supply chain disruptions could affect the business, even as it continues to be unprofitable.

“As we enter a new period, we understand that the current macroeconomic trend and uncertainties could impact our region and the world in the near future,” said Forrest Lee, CEO and co-founder of Sea, during an earnings call.

Both Shopee and Garena, Sea’s two main profitable divisions, saw lower revenues compared to the previous quarter.

E-commerce: Shopee

Shopee generated $1.52 billion in e-commerce revenue in the first quarter, up from $1.59 billion in the previous quarter. Heavy spending on logistics and marketing led to a loss of $810 million, down $131 million from the previous quarter.

The company revised its annual revenue forecast for Shopee from $8.5 billion to $9.1 billion, citing “heightened macroeconomic uncertainty.”

Sea Chief Corporate Officer Yanjun Wang noted that the company is not lowering its forecast, but expanding it as a precautionary measure. His previous forecast was between $8.9 billion and $9.1 billion.

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But according to Christine Lau, an analyst at market research firm Third Bridge, the amount people spend on each order could drop.

“The effect of inflation on discretionary spending is one thing,” she said, referring to non-essential items such as entertainment and luxuries.

“For a lot of the frequently seen items or just the essentials that people had to buy online – either they weren’t available offline or it just made more sense to use Shopee when everything is locked up – I think a lot of that would be redistributed to offline retail,” added Lau.

Game: Garena

Tech Sale

Sea shares have been hurt by the sell-off of tech companies. Its shares are down more than 80% from their October 2021 high of $366.99. Earlier this month, prices fell to a two-year low near $57.

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