What happened
Shares of Sea Limited (SE 0.05%) went down in flames on Tuesday, plunging as much as 12.9%. As of 12:07 p.m. ET today, the stock was down 12.3%.
The catalyst that sent the tech giant lower was an earnings report that fell short in a number of crucial areas.
So what
Sea Limited generated fourth-quarter revenue of $3.2 billion, which soared 106% year over year, resulting in gross profits that surged 146%. Unfortunately, that increase in revenue did nothing to boost the bottom line. The company reported an adjusted loss per share of $0.88.
Image source: Getty Images.
To put those numbers in context, analysts' consensus estimates were calling for revenue of $2.9 billion and an adjusted loss of $0.59.
Driving its revenue higher were e-commerce sales on its Shopee platform of $1.6 billion, up 89% year over year. Gross merchandise volume (GMV) -- or the value of products sold on its website -- climbed to $18.2 billion, up 53%, while the number of orders soared to 2 billion, up 90%.
Sea Limited's digital entertainment segment, led by the company's popular video game Free Fire, generated triple-digit returns, with revenue of $1.4 billion, up 104% year over year, but there were cracks lurking just beneath the surface.
Bookings, which tracks products and services that have been paid for but not yet booked as revenue, provides insight into future trends. In this case, the news wasn't promising as Sea Limited's bookings of $1.1 billion climbed just 7% year over year. To give that number context, bookings in the prior-year quarter were up 111%.
Now what
Management acknowledged the challenges, reporting a "moderation in online activities" resulting from the reopening economies. This likely influenced Sea Limited's tepid outlook, which called for 2022 bookings of $3 billion at the midpoint of its guidance, down 35% compared to its performance in 2021.
Given the dramatic slowdown in the company's gaming business -- which acts as a linchpin for both its e-commerce and digital payments segments -- Sea Limited's stock is much less attractive than it was just a short time ago.
