Shopee, Garena post strong revenue
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Singapore, Singapore – 2021: The entrance to Science Park at Science Park houses a large Shopee Logo. Because of incorrect settings on the camera, exact photography dates are not known.
Istock unreleased | Istock Unreleased | Getty Images
Southeast Asia shares e-commerce, gaming company Sea GroupAfter its revenue exceeded analysts’ expectations, the company exploded.
Sea shares U.S. listed rose to $80.21 on Thursday after the internet company based in Singapore reported revenue that was higher than analysts expected for the first quarter of this year.
The New York Stock Exchange listed company was able to perform in the period January-March.
- Revenue: $2.9 billion vs. $2.76 billion as expected by analysts, according to Refinitiv.
- Net Loss: $580.1 billion vs. $722 billion as expected by analysts, according to Refinitiv.
Sea’s revenue increased by 64.4% over the year before, but declined around 9.5% from its $3.2 Billion revenue in the preceding quarter. This indicates that, after two years driven by pandemic sales, Sea is beginning to see growth plateau.
Shopee, its online shop platform, and Garena, the gaming arm of Garena, grew slower as more countries became available.
Even though it is continuing to make losses, the company raised concerns about inflation and supply chain disruptions.
“As our company enters a new phase, we acknowledge that the current macro trend, uncertainties could affect the region and globe in the near future,” Forrest Li, Sea’s chief executive officers and cofounder, said during the earnings call.
Shopee and Garena were the two major money-making units at Sea, with lower revenues than in the last quarter.
E-commerce: Shopee
Shopee’s e-commerce revenue was $1.52 Billion in its first quarter. This is down from the $1.59 Billion in the preceding quarter. Heavy logistics and marketing expenses led to $810 million in losses — that’s $131 million less than the previous quarter.
Shopee’s full-year revenue guidance was revised to $8.5 billion to $9.1 billion by the company, citing “elevated macro uncertainty”.
Yanjun Wang, Sea’s chief corporate officers pointed out that Sea was not decreasing its guidance but rather widening them as a precaution. The company’s prior guidance ranged from $8.9 to $9.1 trillion.
Kristine Lau of Third Bridge research says that spending on every order may trend down.
She said that inflation’s effect on discretionary spending was one. This refers to items other than entertainment, such as luxury goods.
“For a lot of the high-frequency items or just daily necessities that people had to buy online — either it was out of stock offline or it just made more sense to use Shopee when everything is in lockdown — I think a lot of that would be reallocated to offline retail,” Lau added.
Gaming: Garena
Garena has been Sea’s main profit-maker for a long time and posted $1.1 billion in sales. The gaming division’s net profit was 52.2% higher (or $432m) than the prior year, but it fell 23.5% (859m) from its previous quarter.
Quartly active users fell 32.9 millions year-on-year. Meanwhile, quarterly paying users decreased by over 18 million to 61.4million from 79.8million a year prior. These numbers match concerns about a weaker mobile game market in a post-pandemic environment.
A ban in India could also be responsible for a large part of this loss. India banned Garena’s popular mobile game Free Fire in April, as well 53 apps linking to China.
Chinese tech giant TencentSea’s largest shareholder. It was founded in January. Tencent sold $3 billionSea shares are worth less than 21.3% and 18.7%, respectively.
Tech sell-down
The broader tech downturn has hammered Sea’s shares. The stock of Sea has dropped by over 80% from its October 2021 peak, when it was $366.99. The prices fell to $57, a low for the past two years.
Sea’s cash-burning business model is also a concern. Sea spends hundreds of millions or even billions every quarter marketing. This includes subsidies for merchants to shopee. Shopee competes against the likes. Amazon, AlibabaLazada, Southeast Asia Mercado LibreLatin America
Shopee operates in thirteen countries. It is also present in Europe, Latin America and Southeast Asia. In March 2018, it sold its Shopee businesses in India, France and Spain. This was just months after it had ventured into these two countries.
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