What happened
Shares of Singapore-based e-commerce, payments, and online gaming company Sea Limited (SE 2.03%) were trading down by 7% as of 3:20 p.m. ET Monday.
You can put some of the blame for that drop on the analysts at HSBC.
Image source: Getty Images.
So what
In a note out Monday morning, HSBC announced a savage 43% reduction in its target price on Sea Limited stock, from $265 per share to just $150 per share. As TheFly.com reported, the bank said it had previously "underestimated the impact of the reopening on Sea's business and Shopee's expansion of losses," leaving it surprised by the scale of the company's earnings disappointment earlier this month.
In the fourth quarter, Sea Limited more than doubled its sales year over year -- but instead of shrinking, its net loss grew by 18%. For the full year, Sea Limited reported a loss of more than $2 billion.
Now what
That was a big loss, and it led investors to cut Sea Limited's market capitalization by about 13% on March 1. The stock has experienced even steeper losses in the weeks since. Nevertheless, HSBC is sticking with its buy recommendation on Sea Limited, finding the shares attractively priced at late Monday's levels around $114 per share.
Assuming HSBC is right and Sea Limited shares climb to $150 over the next 12 months, investors who buy now can look forward to gains of 31.5% -- not as good a profit as they'd get if the stock went to $265, admittedly, but still a very nice return.
