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Uncertainty during tough macroeconomic times is perhaps the last thing a firm wants to show investors. However, Sea Group (SE, NYSE) whipped up a platter of it last week after suspending its full-year revenue guidance for Shopee.
Sea had already lowered the revenue guidance of its ecommerce unit earlier this year, but it has now withdrew it altogether, citing “increasing macro uncertainties” as the cause and sending investors on a mad dash to the exits.
The firm’s stock lost about a fifth of its value last week and currently trades at more than 80% below its peak of US$372.70 per share.
The reaction from investors is understandable, given that it is unlikely that a company would rip up its guidance if there was internal confidence that its initial or revised forecast would be met or exceeded. Shopee generated only about 38% of its full-year revenue target in the first half of 2022.
See also: Org Chart: The people running Shopee
But Sea’s decision to pull Shopee’s guidance, while notable, probably isn’t as outlandish as people might think, considering the state of ecommerce around the world has been shaky.
For instance, even Amazon (AMZN, NDAQ) and Alibaba (BABA, NDAQ) reported falling ecommerce sales in their latest quarterly reports. While Shopee does dominate in different countries compared to these industry titans, many of these markets are battling a similar macroeconomic woe: heightened inflation.
It doesn’t help either that Garena, the Singapore-based firm’s digital entertainment unit, has seen falling sales.
If you recall, the market sent Sea’s shares to the dryers after it reported a sluggish 2022 booking guidance for Garena in March. Well, that forecast remains unchanged as it struggles to find an heir to its major cash cow, Free Fire.
Read more: Blockman Go could be Garena’s next big hit after Free Fire
All this brings us to today’s Big Story, where Tech in Asia whips out its magic crystal ball and attempts to do what only a few brave souls would: making sense of the market’s reaction to Sea’s tepid results. Was the response overzealous, justified, or perhaps even too kind?
In this week’s featured piece, my colleague Simon also breaks down the near- and long-term prospects of Sea’s three key pillars. He shines the spotlight on Shopee’s unit economics, decodes Garena’s mixed quarter, and stresses the need for patience at the group’s fastest growing segment, SeaMoney.
— Shravanth
THE BIG STORY
3 Trends to keep an eye on
2 Eye-popping facts
The ones you didn’t see coming
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