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Why Sea Limited Stock Was Falling Today

By Jeremy Bowman – Jul 23, 2020 at 3:27PM

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The popular Southeast Asian tech company slipped with a broader sell-off in growth stocks.

What happened

Shares of Sea Limited (SE 1.13%) were pulling back today on a broader sell-off in the market as investors seemed to get jittery after a disappointing jobs report, moving to a "risk-off" mentality and taking profits in growth stocks that have soared this year.

Among those was Sea Limited, the operator of a digital gaming and e-commerce platform in Southeast Asia, whose shares were down 5% as of 2:37 p.m. EDT. At the same time, the tech-heavy Nasdaq was down 2.3% while the S&P 500 had fallen 1.4%.

The reception desk at a Sea Limited office

Image source: Sea Limited.

So what

There was no specific news weighing on Sea Limited today. In fact, the stock got a buy rating from Blue Lotus, which initiated coverage this morning, but investors seemed to overlook that in the face of the broader sell-off.

This morning, the U.S. Department of Labor said that 1.42 million Americans had filed for unemployment last week, above the previous week's figure at 1.31 million. That was the first increase in initial unemployment claims since March, and a sign that the economic recovery may be coming to a halt in the U.S. as coronavirus cases have spiked again, forcing closures of businesses like restaurants and bars. Additionally, a $600 weekly payment to unemployed Americans is set to expire at the end of the month and Congress has yet to advance a plan that would help ensure that 30 million unemployed Americans can stay on their feet.

As a company doing business in Southeast Asia, Sea isn't directly affected by those measures, but shares have been bid up largely by U.S. investors bullish on sectors like e-commerce and digital payments. The stock is still up 171% year to date, and investors may have decided to take profits given the possibility of "W-shaped" unemployment curve after today's news.

Now what

As earnings season begins, MicrosoftTesla, and Chipotle Mexican Grill all delivered strong results last night, but those stocks fell nonetheless. Like Sea, they have surged this year, but the pullback seems to indicate that investors believe that the rally in growth stocks needs to be reined in, at least for now. Sea's earnings report won't come out until August, and analysts have high expectations, calling for a 72% jump in revenue to $1.05 billion.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman owns shares of Chipotle Mexican Grill and Sea Limited. The Motley Fool owns shares of and recommends Chipotle Mexican Grill, Microsoft, Sea Limited, and Tesla and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Sea Limited Stock Quote
Sea Limited
SE
$54.58 (1.13%) $0.61
Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$236.13 (-0.56%) $-1.32
Tesla, Inc. Stock Quote
Tesla, Inc.
TSLA
$279.29 (1.19%) $3.28
Chipotle Mexican Grill, Inc. Stock Quote
Chipotle Mexican Grill, Inc.
CMG
$1,536.80 (0.31%) $4.81

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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