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The analysts told investors that the company’s strategy shift amid intensified competition raises uncertainty.
Sea reported a mixed 2Q23 on Tuesday, missing earnings expectations. However, the company’s gaming operating metrics like QAU and paying users and e-commerce metrics like gross order growth and active users achieved sequential growth.
“Management expects ongoing reaccelerated investment could lead to Shopee EBITDA and group level profit reverting to loss in future quarters,” the analysts wrote.
“Although we agree it is the right approach to defend market share amid intensified competition, no clear direction of GMV growth and management’s tolerance of turning back to loss-making suggest to us that there is a lack of visibility on the investment’s effectiveness and a brutal battle could be just starting.”
Citi believes investors’ confidence in the stock “has been hammered” and that the share price is likely to be range bound as a result.
