Sea Earnings Preview: Analysts Feel Disappointed with 2022 Guidance

Sea Limited (NYSE:SE) is scheduled to announce Q1 earnings results before market opens on Tuesday, May 17.

Latest Results

Sea reported a Q4 loss of $0.88 per share, as compared with a loss of $0.87 a year ago. Revenue for the quarter ended Dec. 31 was $3.22 billion, up from $1.57 billion a year earlier.

Digital entertainment revenue increased 104.1% Y/Y to $1.4 billion, and bookings rose 6.8% Y/Y to $1.1billion.Digital financial services revenue grew 711.1% Y/Y to $197.5 million. E-commerce revenue increased 89.4% Y/Y to $1.6 billion.

"And while there are some headwinds impacting our digital entertainment business in the near term, we continue to remain extremely focused on developing Garena's global platform, which we see as a key strategic asset in the long run," said Forrest Li, Sea's Chairman and Group CEO.

Company Outlook

Looking ahead to 2022, the company is expecting GAAP e-commerce revenue of $8.9 billion to $9.1 billion. The GAAP revenue for digital financial services is expected to be in the range of $1.1 billion to $1.3 billion.

Sea expects its Shopee e-commerce business and SeaMoney digital-payments and financial-services unit to substantially self-fund their long-term growth by 2025, founder Forrest Li says. Li says the company will continue to invest in Shopee's Latin America operations, with a focus on Brazil.

Analyst Opinions

Stifel analyst Scott Devitt denoted lessened enthusiasm for Sea. He pointed to restrictions on product offerings put in place by the Indian government and growing pains in expansion into Europe remain problematic to the upcoming earnings setup. While Devitt lowered his price target from $200to $160, he maintained a Buy rating on shares given the still-healthy opportunity ahead.

Barclays analyst Jiong Shao lowers the firm's price target on Sea Limited to $201 from $218 and keeps an Overweight rating on the shares. While the company's fiscal 2022 gaming guidance is "clearly disappointing," the e-commerce outlook came in solidly ahead of expectations, Shao tells investors in a research note. The analyst says gaming is legacy and e-commerce and fintech are the future of Sea.

China Renaissance analyst Sam Lee lowers its price target to $153 from $156 and keeps a Buy rating on the shares. The analyst expects no major negative surprises in Q1 and says Sea's 2022 guidance should remain intact. Current headwinds are priced into shares and the company has stronger catalysts in the second half of 2022.