Sea Stock Moored by Downgrade Ahead of Earnings

The company is fresh off all-time highs

Assistant Editor
May 15, 2020 at 10:45 AM
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The shares of Sea Ltd (NYSE:SE) are down 1.6% at $60.52 at last check, after the software company was downgraded to "hold" from "buy at Stifel. Although the brokerage upped its price target to $62 from $55, the analyst in coverage is positive on the growth of Shopee, the company's e-commerce platform in Asia, and adjusted to "hold" as the stock is "appropriately reflective" of its expectations. Cowen chimed in with a price-target hike of its own to $67 from $55.

With first-quarter earnings due out before-the-open on Monday, May 18, SE is fresh off an all-time high of $64.38 on May 12. Now pulling back to the $60 region --which coincides with its 10-day moving average -- the equity is down 3.7% for the week yet still up around 52% so far for 2020. 

Looking at Sea's earnings history, the stock has a history of volatile post-earnings moves. Of the eight previous reports, five have been positive, including a 18.6% swing higher in November. Following its May 2019 quarterly report, SE saw a swing upward of 24.1% The security averages a 14.1% swing, regardless of direction, the day after its last eight reports, and this time around, the options pits are pricing in 14.5% shift, regardless of direction.

Coming into today, analysts sing a bullish tune on Sea stock, with all six in coverage sporting a "buy" or better. Despite this, short interest has risen 5% in the last two reporting periods to make up 29.34 million shares -- 10% of the stock's available float, or six days worth of pent-up buying power, at the stock's average pace of trading. 

Options traders have honed in on puts. SE's 10-day call/put volume ratio of 11.04 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits in the 75th percentile of its annual range, suggesting a healthier-than-usual appetite for calls.

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