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A classic case of completely bonkers market for valuing SEA Ltd. At its peak share price of USD300+, it also suffered its peak cash burn and it was evident all the while irrational competition is going to continue into the foreseeable future.
Fast forward 2023 Q2 results. they executed their strategic pirorities well to have made some profit on shopee thus far this year. However, the "growth" that was enabled by rappid cash burning no longer can be seen. At the same time it is highly likely SEA will go back to cash burning mode again to defend market share.
There is absolutely no logical way to value SEA Ltd. Lazada isnt going away and tik tok looks to be coming on board fast and furious. While the ecommerce pie sets to grow further, it comes with large hungry wolves willing to lose an arm and leg for it, it begs the question is it worth the while to take on competition head on? Can shopee differentiate itself to be so far ahead of competition that margins can be healthy? The obvious answer is no.
With layers upon layers of uncertainty, how does one start to value this company? You cant. Is it undervalued or overvalued now? I dont know.
While their cash flow improved somewhat, it is reasonable to think that the prospects are getting a whole lot dimmer.
Consider this. Cheap money no longer available, issuing more bonds isnt a good option. They have to pay back the bond holders OR suffer massive dilution when their convertible bonds are due. Their gaming division has clearly passed their peak earnings and in decline. there is no indication they will have another hit game to fuel its growth. Competition is only going to get worse. And their banking division relies on shopee, it cant stand on its own 2 feet.
Fast forward 2023 Q2 results. they executed their strategic pirorities well to have made some profit on shopee thus far this year. However, the "growth" that was enabled by rappid cash burning no longer can be seen. At the same time it is highly likely SEA will go back to cash burning mode again to defend market share.
There is absolutely no logical way to value SEA Ltd. Lazada isnt going away and tik tok looks to be coming on board fast and furious. While the ecommerce pie sets to grow further, it comes with large hungry wolves willing to lose an arm and leg for it, it begs the question is it worth the while to take on competition head on? Can shopee differentiate itself to be so far ahead of competition that margins can be healthy? The obvious answer is no.
With layers upon layers of uncertainty, how does one start to value this company? You cant. Is it undervalued or overvalued now? I dont know.
While their cash flow improved somewhat, it is reasonable to think that the prospects are getting a whole lot dimmer.
Consider this. Cheap money no longer available, issuing more bonds isnt a good option. They have to pay back the bond holders OR suffer massive dilution when their convertible bonds are due. Their gaming division has clearly passed their peak earnings and in decline. there is no indication they will have another hit game to fuel its growth. Competition is only going to get worse. And their banking division relies on shopee, it cant stand on its own 2 feet.