What a different world we are in, compared to October 2021, when Sea’s market cap hit $200 billion. As of yesterday (27 Jan), the share price has dropped almost 2/3 from the all time high.
A few friends asked us in Impulso – Momentum Works’ own community app – our perspectives on the current situation. Here is a summary of our thoughts based on the discussion:
- The stock is oversold for sure (technical indicators indicate the same);
- The company is having the right strategy – esp. recent building of infrastructure (Shopee Express, global expansion etc.);
- A question is that Garena doesn’t generate enough profit to fund all these – so the company has to rely on the capital market for funding (where it recently raised >$6b);
- That exposes the company to market sentiment and liquidity swings, sometimes violently;
- Freefire lifespan is again raised as a question / so is the potential slow down or ID e-commerce growth (some data sources suggest that);
- We suspect the aggressive ShopeeFood push recently is related to slowing down e-commerce order volume growth in SEA especially ID;
- Another potential concern is management attention – although that concern has been there for a while and we do not see this reaching a point where we need to worry yet.