Shopee parent Sea expects 2024 to be another profitable year

DNHN - Sea also revealed that Shopee’s regional market share has “stabilised” and the company plans to “maintain this market share position in 2024”.

Sea has reported its first annual net profit since its initial public offering (IPO) last year, helped by aggressive cost-cutting, and the Shopee parent company expects to remain profitable in 2024. This comes as the e-commerce giant looks to defend its market share against rivals Lazada and TikTok Shop.

According to CNBC, despite posting a net loss of US$111.6 million in the fourth quarter of 2023, Sea swung to a net profit of nearly US$163 million for the full year. This marks the first time the Shopee parent has recorded an annual profit. In 2022, Sea posted a loss of US$1.7 billion.

“In 2023, we achieved profitability, strengthened our leadership in e-commerce, grew our digital financial services business, and stabilised our digital entertainment business,” said Forrest Li, Sea’s chairman and group CEO.

Sea had previously reported consecutive quarterly losses, accumulating billions of dollars in losses since its founding in 2009.

The company operates across Southeast Asia and has e-commerce (Shopee), digital financial services (SeaMoney), and gaming (Garena) businesses.

“As a result, we exited the year with a stronger balance sheet, with our cash increasing to US$8.5 billion at the end of 2023. This reflects the discipline and prudence we have applied to our investments over the past year,” Li said.

“Looking ahead, we expect 2024 to be another profitable year,” Li added, although Sea did not provide specific financial guidance.

Sea’s e-commerce arm, Shopee, saw “significant market share gains” in 2023 despite “intensifying competition in Southeast Asia”, the company said. Sea also revealed that Shopee’s regional market share has “stabilised” and the company plans to “maintain this market share position in 2024”.

The group’s revenue for 2023 came in at US$13 billion, up 5%. Revenue from its e-commerce business, Shopee, rose 31% to US$9.77 billion. However, revenue from its gaming business, Garena, fell 44% to US$2.17 billion as the number of active and paying users continued to decline following the Covid-19 pandemic.

DBS analyst Sachin Mittal said Sea’s outlook for 2024 was “positive and surprising”. Following Sea’s earnings release, DBS upgraded its call on Sea shares from “hold” to “buy” with a target price of US$75 per share.

“This has to do with TikTok not being as aggressive in Indonesia. They have got what they wanted with Tokopedia and are now focused on regulatory compliance,” Mittal said in an interview with CNBC.

Similarly, CGS-CIMB Securities analyst Khang Chuen Ong upgraded his call on Sea shares from “hold” to “buy”, raising his target price from US$46 per share to US$74 per share.

“We believe Sea is in the early stages of a successful turnaround, as competitive pressures ease and investments in live streaming, new user acquisition … start to bear fruit,” a research note from Wedbush said.

Phuong Ha