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Why Sea Limited Stock Was Pulling Back Today

By Jeremy Bowman - Mar 4, 2021 at 12:21PM

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Shares of the Southeast Asian tech giant continued to slide on a broader rotation in the market.

What happened

Shares of Sea Limited (SE 2.90%) were pulling back today, as the slide in high-growth tech stocks continued as investors rotated out of them and into more cyclical options that are poised to benefit from the economic reopening.

As of 12:55 p.m. EST, Sea Limited shares were down 7%.

The reception desk at a Sea office

Image source: Sea Limited.

So what

There was no news out on Sea, and in fact, the only update from Wall Street was positive as Credit Suisse raised its price target from $285 to $325.

However, investors overlooked that, and Sea was one of several growth stocks to pull back in line with a trend over the last few weeks that's seen growth stocks slide as bond yields rise, putting pressure on stock valuations. 

Sea has been one of the biggest beneficiaries from the coronavirus pandemic. The company's three business segments -- digital gaming, e-commerce, and digital payments -- have all gotten tailwinds from the stay-at-home effects of the crisis. But the market now seems to have priced that in. When the company reported that revenue had doubled in its earnings report on Tuesday, the stock was initially up double-digits, but ended the day nearly flat.

Now what

Over the last year, Sea shares are up nearly 400%, so the stock could have further to fall if investors continue to move out of growth stocks. The stock trades at a price-to-sales valuation close to 30, and is still unprofitable, meaning it's priced for near perfection. 

The company gave strong guidance for the year, calling for a 38% increase in digital entertainment bookings and 112% revenue growth in e-commerce. Investors should keep an eye on those targets as the economic reopening progresses.

 

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Stocks Mentioned

Sea Limited Stock Quote
Sea Limited
SE
$80.47 (2.90%) $2.27
Credit Suisse Group AG Stock Quote
Credit Suisse Group AG
CS
$5.95 (5.50%) $0.31

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