Singapore-based internet services company Sea Limited early Tuesday reported third quarter earnings that beat expectations, with a stronger-than-expected 31% revenue increase. Sea stock jumped following the report, which showed the company boosting e-commerce sales growth and profitability despite growing competition.
Sea said in a news release that it earned 24 cents per share on sales of $4.3 billion for the September-ended quarter. Analysts polled by FactSet projected Sea earnings of 23 cents per share on sales of $4.1 billion. For the same period a year earlier, Sea lost 26 cents per share on sales of $3.3 billion.
Sea is the owner of the Shopee e-commerce network, which is popular in Southeast Asia and Taiwan. Shopee also has expanded to Brazil and other parts of Latin America.
Sea stock is ahead more than 18% at 115.30 in morning trading on the stock market today. That marks a two-year high for the stock, which has gained more than 175% year to date. Sea stock cleared a three-weeks-tight pattern with an entry point at 101.93, according to MarketSurge.
Sea's Best Sales Growth Since Q1 2022
The 31% year-over-year revenue gain is Sea's fastest growth since it grew sales 64% in the first quarter of 2022. Sales growth slowed from there, bottoming out at 5% in fourth quarter last year, as Sea came up against difficult comparisons to quarters where pandemic conditions ignited e-commerce growth.
The reacceleration for Sea's sales growth comes as the company is fending off challengers such as Alibaba Group's Lazada, PDD Holdings' Temu and TikTok Shop. Sea stock tumbled last year when it warned profits could take a hit as it invested in Shopee to ward off competition. Now, the company says it can grow both the top and bottom lines.
"I am very proud that we also improved our profitability while getting back to high growth," Sea Chief Executive Forrest Li said in a news release. "This quarter, Shopee achieved positive adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), in both Asia and Brazil. As we continue to focus on delivering growth, we expect Shopee to remain profitable going forward."
Sea Offers Positive Outlook
Overall, Sea's e-commerce revenue jumped 41% to $3.4 billion for the quarter. The platform handled 2.8 billion customer orders, up 24% from a year earlier.
Sea's other holdings include digital-payments provider SeaMoney and Garena, a global online games developer known for the battle royale game Free Fire.
Li offered positive commentary on each of the three businesses.
"Shopee is on track to deliver our full year guidance of mid-twenties year-on-year GMV (gross merchandise value) growth," Li said in a news release. "SeaMoney's loan book grew by over 70% year-on-year this quarter, while maintaining a stable NPL (nonperforming loans) ratio. And for Garena, we now expect Free Fire's full year bookings to grow over 30% year on year."
Sea's adjusted EBITDA was $521.3 million, compared to estimates of $491 million, according to FactSet. Sea's digital entertainment and digital financial services account for the majority of Sea's adjusted earnings. But Shopee is the fastest-growing business for Sea and swung from a loss of $346.5 million in Q3 2023 to $34.4 million in adjusted EBITDA.
Sea More Than Doubles This Year
With its surge this year, Sea has bounced back from a rough 2023 when it lost 22% of its value. But shares are still well below highs of near 372 it reached late in 2021, when Sea stock was a pandemic favorite and rocketed higher.
Coming into the report, Sea stock had an IBD Composite Rating of 73 out of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
Further, Sea's IBD Relative Strength Rating was 96 out of 99. The RS Rating means that Sea has outperformed 96% of all stocks in IBD's database over the past year.
