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Why Sea Limited Stock Was Climbing Today

What happened

Shares of Sea Limited (NYSE: SE) were moving higher today after the Southeast Asian e-commerce and digital gaming company reported first-quarter earnings this morning. The stock actually opened up lower initially as Sea missed analyst estimates, but investors pounced on the sell-off, bidding the stock higher on what was mostly a strong report.

As of 1:02 p.m. EDT, shares were up 2.9%.

Image source: Sea Limited.

So what

Revenue soared 146.7% to $1.76 billion in the quarter, though that was short of estimates at $1.81 billion. Sea's digital entertainment division, known as Garena, posted 117% growth to $1.1 billion, while e-commerce sales continued to skyrocket with sales up 250.4% to $922.3 million, and strong growth in its marketplace and in direct sales.

Garena continues to be the profit driver with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in that division growing 140% to $717.3 million. At Shopee, its e-commerce business, its adjusted EBITDA loss widened from $264.1 million to $412.9 million, though its loss per order declined from $0.61 to $0.38, showing the business making progress toward breakeven.

On the bottom line, its adjusted loss per share expanded from $0.52 to $0.62, which was worse than estimates at $0.46.

Sea Money, the smaller digital payments segment and the third leg of Sea's business, saw total payment volume more than triple in the quarter to $3.4 billion. It now has 26.1 million quarterly paying users.

On the earnings call, CEO Forrest Li said:

We are pleased to start 2021 on a strong note with our results for the first quarter showing continued high growth across all our businesses. Even with the revenue recovery in offline activities in our region since the second half of 2020, our strong performance in terms of users' growth and engagement shows that digital adoption is still rising healthily as the communities we serve continue to embrace the benefits of online lifestyle.

Now what

Looking ahead, Sea held its guidance for the year, calling for $4.3 billion to $4.5 billion in digital entertainment bookings and $4.5 billion to $4.7 billion in revenue for e-commerce.

The company's Free Fire game has helped drive its growth in e-commerce. The game has been a big hit across Latin America, Southeast Asia, and India where it has established itself as a leader in mobile games.

Sea was a big winner during the pandemic, but the stock has pulled back in recent months as growth stocks seem to be digesting those gains. Still, the first-quarter report shows the tech company remains a growth juggernaut.

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Jeremy Bowman owns shares of Sea Limited. The Motley Fool owns shares of and recommends Sea Limited. The Motley Fool has a disclosure policy.


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