E-commerce and mobile gaming platform giant Sea Ltd (NYSE:) stock has been a massive pandemic benefactor rising over 5X off its pandemic lows. The question for this Singapore-based digital entertainment giant is how much of the growth will stick. The Company has experienced tremendous growth and has expanded beyond being just a mobile gaming platform to delve into various digital finance, e-commerce, and social media applications leveraging the network effect to its maximum. The Company is growing triple digits on a year-over-year basis and valuations are set high. The return to normal and reopening trend will likely cause a reversion to its core gaming division, which has been funding the growth divisions. Sea has often been referred to as the Amazon (NASDAQ:) of Southeast Asia as they are extending their reach into and growth abroad. Prudent investors seeking international exposure with leading e-commerce and mobile gaming platform can watch for opportunistic pullbacks.

Q1 FY 2021 Earnings Release

On May 18, 2021, Sea Limited released its fiscal first-quarter 2021 for the quarter ending March 2021. The Company reported an earnings-per-share (EPS) loss of (-$0.62) missing analyst estimates for (-$0.56), by (-$0.06). Total GAAP revenues rose 146.7% year-over-year (YoY) to $1.8 billion beating $1.68 billion consensus analyst estimates. Gross profits came in at $645.4 million , up 212.1% YoY. Total adjusted EBITDA was $88.1 million versus (-$69.9 million) in the year-ago same period. Digital Entertainment bookings rise 117.4% YoY to $1.1 billion. Quarterly active users (QAU) rose 61.4% to 648.8 million. Quarterly paying users rose 123.5% to 79.8 million representing 12.3% of QAUs versus 8.9% in Q1 2020. Average bookings per user was $1.70 compared to $1.30 for Q1 2020. Free Fire was the highest-grossing mobile game in Latin America, Southeast Asia, and India. E-commerce GAAP revenue was up 250.4% at $922.3 million. Adjusted EBITDA was (-$412.9 million) compared to (-$264.1 million) in year ago same period. Shopee ranked #1 in the Shopping category in Southeast Asia and Taiwan. SeaMoney’s offerings continue to see strong adoption and growth with mobile wallet total payment volume exceeding $3.4 billion in Q1 2021, up over 3X for Q4 2020. Quarterly paying users for mobile wallet services surpassed $26.1 million.

Conference Call Takeaways

Sea Limited CEO Forrest Li, set the tone:

“Even with the revenue recovery in offline activities in our region since the second half of 2020, our strong performance in terms of users’ growth and engagement shows that digital adoption is still rising healthily as the communities we serve continue to embrace the benefits of the online lifestyle.”

He spoke of the numerous philanthropic efforts pushed by the Company in Asia assisting the acceleration of COVID-19 vaccinations as well as helping small and medium-sized businesses. Their flagship Garena World event had an audience of 1.2 million with more than 40 million views from social media channels.

“During the fully virtual 2-day event that was hosted in Thailand, we used the combination of augmented reality, visual effects and animation and other technologies to provide our fans with an interactive and immersive experience. For example, we hosted a dedicated live screening platform where viewers can customize their avatars and express their views through chat.”

He went on:

“We also received a number of awards at the Pocket Gamer Awards 2021 with Garena winning the best mobile publisher award and Free Fire named as the best Battle Royal Game.”

CEO Li also pointed out how Shopee reported 1.1 billion gross orders, up 153% YoY and general merchandise value (GMW) of $12.6 billion, up 103% YoY as GAAP revenues also rose 250% YoY. Shopee is the leader in its largest market Indonesia. He concluded:

“To conclude, we believe that e-commerce penetration remains low in our total market despite the change in digitalization since the onset of the pandemic.”

Sea Limited Stock Chart

Sea Limited Stock Chart

SE Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the playing field for SE shares. The weekly rifle chart shows a uptrend with rising 5-period moving average (MA) support near at $274.81. The rising 15-period MA is at $252.72. Shares peaked out near the $297.32 Fibonacci (fib) level forming a weekly market structure high (MSH) trigger on the breakdown below $269.77. There is also a secondary weekly MSH trigger under $225. The weekly market structure low (MSL) buy triggered on the breakout through $240. The weekly stochastic has a mini pup attempt at the 90-band.

The daily rifle chart is in a breakdown with a falling 5-period MA at $277.78 as the stochastic mini inverse pup falls to the 40-band. The daily lower Bollinger Bands (BBs) sit at the $255.49 fib. Risk-tolerant investors can monitor for opportunistic pullback levels at the $266.85 fib, $259.67 fib, $255.49 fib, $249.60 fib, $246.07 fib, $242.50 fib, $225.28 fib, and the $212.44 fib. The upside trajectories range from the $309.55 fib up towards the $379.04 fib level. Shares can be thinly traded with wide spreads so be sure to keep a stop-loss in place.

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