Expectations remain high as Sea Group is set to deliver Q1 2023 results

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Sea Group logged an impressive turnaround in the fourth quarter of 2022, recording a recovery to US$422.8 million in net income from a loss of US$616.3 million in the same year-ago period. This came on the back of Shopee finally hitting its first-ever profitable quarter.

All eyes are watching whether this momentum can be sustained or if it’s “a momentary blip,” as Sea Group CEO Forrest Li previously said in an internal memo. The group’s Q1 2023 report card is due tomorrow.

In an interview with Bloomberg, Li said the company “cared about every single dollar, every single cent” to battle out unprecedented hurdles this past year.

Shawn Yang, a researcher from Blue Lotus that contributes to Smartkarma, noted in this analysis that “the absence of marketing efforts and reduction in free shipping leave Shopee at a tough position to defend its market share against competitors.”

These include TikTok Shop, Lazada, and Shein, which has been doubling down on its third-party marketplace in Brazil, according to Yang.

Vektor Research, an outfit that contributes to Seeking Alpha, pointed out that the growth of Shopee’s gross merchandise value growth already slowed to 8% year on year in Q4 2022 from 21% year on year in Q3 2022.

The question is whether take rate increases would be enough to support Sea’s ecommerce top-line growth for an extended period.

“There will always be competitors or other entrants into the market with different angles, different positioning, different advantages, etc.,” Sea Group chief corporate officer Yanjun Wang told analysts in the latest earnings call.

However, she stressed the importance of having “deep local operational capabilities” to succeed in the ecommerce game and cited the diversity of various Southeast Asia markets, which have to be conquered “one by one.”

See also: TikTok Shop has set SEA on fire within months