Is the Bottom In For Sinking Sea Stock?

SE has metrics that make it an intriguing target for options traders

Apr 14, 2022 at 11:04 AM
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Software stock Sea Ltd (NYSE:SE) was a pandemic darling, racing to a record high of $372.69 by October 2021. Since then, it's been a steep, calamitous drop, with many investors that bought into the tech rally left holding the remnants. Is SE salvageable? 

At last check, Sea stock was down 4.6% to trade at $107.87. The shares bottomed out on March 15 at $85.01, marking a 77% drawdown from those October highs. Of the 12 brokerages covering SE, nine maintain "buy" or better ratings, with zero "sells" on the books. In other words, if analysts begin to adjust their stance, SE could see even more headwinds on the charts.

Sea reported $9.96 billion in revenues for fiscal 2021, indicating an incredible growth rate. The figure marked a 128% increase since fiscal 2020 and a 1104% increase since fiscal 2018. However, on the bottom-line Sea Ltd reported $2.05 billion in net losses for fiscal 2021, which was a $428 million decrease compared to fiscal 2020 and roughly a $1.09 billion decrease since fiscal 2018.

Still, Sea stock’s outlook is fairly positive for the next couple of years, with a balance sheet of $10.16 billion in cash and $4.25 billion in total debt. In addition, the internet company is estimated to finish fiscal 2022 with 37.2% revenue growth and increase revenues another 35% for fiscal 2023. Moreover, with Sea stock now trading at a much more attractive price-sales ratio of 6.12, growth investors will be taking on significantly lower risk, despite the fact that profitability is still nowhere in sight.

Maybe a short-term directional move through options is a route an investor would want to take. In that case, it's also worth noting the equity's Schaeffer's Volatility Scorecard (SVS) sits at 87 out of 100, suggesting SE has exceeded options traders' volatility expectations over the past year.


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