Wednesday's Headlines: Sea Limited Soars Following Profitability Push

Wednesday's Headlines: Sea Limited Soars Following Profitability Push

Here were the biggest movers in the MyWallSt shortlist yesterday:

Moving Up ⬆️

Sea Limited (SE) +36.0%

2U (TWOU) +17.1%

The Trade Desk (TTD) +12.1%

Baozun (BZUN) +11.7%

Datadog (DDOG) +10.2%

Moving Down ⬇️

THOR Industries (THO) -2.4%

Markel Corp (MKL) -1.0%

Tripadvisor (TRIP) -0.9%

Constellation Brands (STZ) -0.4%

Coca-Cola (KO) -0.2%


Sea Limited Soars Following Profitability Push 

Shares in the Singapore-based tech conglomerate Sea Ltd. soared by 36% yesterday following the release of its third-quarter earnings report. A renewed focus on profitability over growth appears to have appeased investors who had likely grown uneasy with the company’s slide since it reached all-time highs in late 2021.

Sea reported an adjusted loss per share of $0.66 on revenue of $3.2 billion, outpacing analyst estimates of a $0.95 loss per share and sales of $3.01 billion respectively. The company also lowered its guidance for the full year from an initial range of $2.9 billion - $3.1 billion to a more conservative $2.6 billion - $2.8 billion. Typically, this might have seen investors sell in their droves with the market highly reactionary of late. However, Sea’s refocus on profitability seems to have quelled any selloffs. Chairman and CEO, Forrest Li, stated:

“Given the significant uncertainties in the macro environment, we have entirely shifted our mindset and focus from growth to achieving self-sufficiency and profitability as soon as possible, without relying on any external funding,”

This comes as welcome news to shareholders considering the rotation en masse we’ve seen away from tech this year so far. It’s a difficult enough landscape for tech companies right now, made all the more difficult when they don’t report a profit. This realignment of Sea Ltd. will hopefully stem the bleeding for a company that is already down 72% year-to-date.

Sea has reportedly cut close to 10% of its workforce already in a bid to tighten up costs, while top-level management have been foregoing their salaries since September “until the company reaches self-sufficiency.”


Alphabet Proves No One is Safe from Activist Investors 🔤

Another day, another activist investor eager to make a difference. TCI Fund Management has called upon Alphabet (GOOG) to cut costs in the midst of the present macroeconomic climate and challenging advertising market.

According to TCI, which has been an investor in Alphabet since 2017 and holds a $6 billion stake, Google’s parent company has "too many employees and cost per employee is too high". Alphabet has some of the highest salaries in the sector and has increased its headcount by 20% annually for the last six years.

So far this year, Alphabet has not announced job cuts but has committed to cost-cutting through other means. After a Q4 earnings miss in October, the company announced it would slow hiring and sharpen its “focus on a clear set of product and business priorities” in the hopes of fueling the “highest growth”.

This doesn’t seem to be enough for TCI though, which not only called out Alphabet’s ballooning headcount but also its cash-draining Other Bets segment. This group is home to Alphabet’s moonshots like driverless cars, fiber optic internet, and lifespan expansion, and it cost the business $5 billion in 2021 while bringing in less than 1% of revenue.

According to TCI, Alphabet should call time on most of these efforts, pointing to the fact many competing companies have exited the driverless car game. If the activist investor had its way, these speculative investments would be “dramatically” reduced and losses would be curbed by more than 50%.

Alphabet has not responded to the report and its stock is so far unaffected.


Walmart Shares Rise on Positive Outlook 🛒

Shares of Walmart rose 6% on Tuesday after the company beat expectations and gave a rosy outlook for the coming quarter.

The retailer announced sales of $153 billion, up 9% year-over-year. That was led by an 8% increase in comparable same-store sales and a 16% increase in e-commerce sales. The company brought in $1.50 in adjusted earnings per share versus $1.32 expected.

Walmart also announced that it has settled an opioid-related lawsuit for about $3.1 billion but denied any culpability.

Management warned that the economy was having an impact on consumer spending habits, with customers opting for lower-priced products like hotdogs and beans instead of pricier proteins. However, they noted that they have seen a strong “back-to-school” season.

Heading into the holidays the company gave conservative guidance saying that the macroeconomic conditions would make it hard to gauge demand for more expensive items like televisions and apparel. The retailer said it would be rolling out more sales events to attract consumers in the high-inflation environment.

It now expects net sales to grow about 5.5% for the fiscal year — half a percentage point higher than Wall Street had anticipated.

Shares of Walmart took a big hit this summer after the company missed estimates and gave a hawkish outlook for the year. At the time, management said they had seen a notable trend in consumers bypassing discretionary products in favour of essentials. The stock has since rebounded and is now flat for the year.

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