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Why Sea Limited Stock Pulled Back Today

By Jeremy Bowman – Aug 16, 2021 at 7:59PM

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Investors took profits ahead of tomorrow's earnings report.

What happened

Shares of Sea Limited (SE -2.35%) dropped today in advance of the tech company's second-quarter earnings report tomorrow morning. While the only company-specific news out on Sea, which operates as a mobile gaming, e-commerce, and digital payments platform, was positive, investors still took the opportunity to take profits afraid that a downbeat report could weigh on the stock.

The stock closed the day down 5.3%.

The reception desk at the Sea office.

Image source: Sea.

So what

The sell-off in Sea Limted came in spite of an upgrade from Cowen and news that investment firm Tiger Global had added to its stake in the company.

Cowen raised its price tag from $280 to $345 and kept an outperform rating on the Singapore-based growth stock, with analyst John Blackledge touting the growth of the Shopee e-commerce platform in Latin America. Meanwhile, Tiger Global added more than 600,000 shares to its Sea Limited holdings, showing further confidence in the stock at a time when the price has been elevated.

Despite those endorsements, Sea Limited shares still fell. Investors may be fearing a weaker-than-expected performance when the company reports earnings tomorrow morning, especially as it laps a surge during the pandemic a year ago when revenue jumped 147% to $1.8 billion.

Now what

A number of e-commerce stocks like Amazon and Etsy have turned in weaker-than-expected results in the second quarter, giving investors a dose of reality as the tailwinds from the pandemic fade and they face difficult comparisons with the year-ago quarter. Sea Limited seems to be in a similar situation given the way its businesses benefited from the pandemic.  

Analysts are expecting 50% revenue growth to $1.93 billion and for its per-share loss to narrow from $0.68 to $0.52. Sea stock has more than doubled over the past year and trades at a steep valuation, so it's understandable why investors would want to take profits.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman owns shares of Amazon, Etsy, and Sea Limited. The Motley Fool owns shares of and recommends Amazon, Etsy, and Sea Limited. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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