What happened

Shares of Sea Limited (NYSE:SE) were heading lower today as the high-flying e-commerce stock got swept up in a market rotation out of momentum growth stocks for the second day in a row.

As of 10:47 a.m. EDT on Tuesday, the stock was down 3% after falling as much as 6.7% earlier in the morning and 6% on Monday.

The Sea Limited offices

Image source: Sea Limited.

So what

There was no specific news out today on Sea, which operates as a digital gaming, e-commerce, and online payments platform across Southeast Asia, but it was one of several "coronavirus stocks" to pull back today as investors' sentiment seems to be shifting. For the second day in a row, the Dow Jones Industrial Average was outperforming the Nasdaq by a wide margin, showing that investors were moving out of overstretched tech stocks and into beaten-down cyclical stocks.

The shift began on Monday after California, the nation's most populous state, announced a broad pullback of its economic reopening, saying that it would close bars and indoor dining, and other indoor establishments like museums. In 30 counties that are the most affected by the outbreak, the state will impose tighter restrictions. And its two largest school districts, Los Angeles and San Diego, said they would not open for classes in the fall, instead continuing to operate remotely.

The news seemed to further douse hopes of an economic recovery and led investors to sell stocks that have perhaps been overinflated after rising almost daily in recent weeks.

Sea Limited may be one of those. Though the company doesn't have direct exposure to the U.S. and is well positioned for the pandemic considering its digital business, the stock is up 172% year to date even with the recent sell-off. Nearly all of those gains have come since the beginning of April on relatively little news. Instead, the assumption that it will be a beneficiary from the pandemic seems to have propelled the stock. While the company's growth prospects are promising, high expectations are now baked into the share price.

Now what

Sea Limited's second-quarter earnings report is expected in August, though the company hasn't announced a date yet. The stock should swing on that news given its run-up in recent months and the expectations now built in. Analysts are expecting revenue to jump 69.5% to $1.04 billion and for its loss per share to narrow from $0.52 to $0.48.