What happened
Sea Limited's (SE -1.33%) stock price slide is accelerating today. On Tuesday, shares of the Singapore-based e-commerce, payments, and online gaming company slid more than 3% after the company reported better-than-expected sales for the third quarter but a huge earnings miss. Today, that share slide is turning into an avalanche, with Sea Limited stock down another 10% as of 10:15 a.m. EST.
Image source: Getty Images.
So what
What caused today's sell-off? It's not immediately obvious, because while one investment bank, Citigroup, did lower its price target on Sea stock, a second bank, UBS, raised its target. What's more, the new targets of $416 and $380, respectively, are both well above where Sea shares sit today.
That hardly seems a good reason why investors would be selling the stock. But last night, right after earnings came out, analysts at Bank of America also tweaked their price target on Sea, to $385 a share. What was different about this note, however, was that BofA also downgraded Sea Limited stock to neutral, pulling is previous buy rating.
Now what
As Bank of America explained in a note covered on StreetInsider.com, Sea Limited's new guidance released yesterday implies slowing fourth-quarter growth in the company's gaming division, partly offsetting the continued strength of the company's growing e-commerce business. At the same time, the bank foresees an increase in e-commerce losses -- and not a small increase, either.
According to BofA's latest calculations, Sea is likely to lose a staggering $5.72 per share this year (nearly twice the losses it previously expected) and then lose another $4.45 per share next year -- four times what BofA had forecast previously for 2022.
When you take this forecast in conjunction with the fact that, as BofA points out, Sea is up 67% year to date, it's no great surprise it is suggesting investors might want to quit this stock while they're still ahead.
