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Sushree Mohanty

Up 175% in 2024, Can This Growth Stock Keep Climbing?

Singapore-based Sea Limited (SE) has emerged as one of Southeast Asia’s most closely followed tech companies, often compared to industry giants like Amazon (AMZN), Alibaba (BABA), and Tencent (TCEHY) due to its diversified business model. The company operates across three key sectors: e-commerce through Shopee, digital entertainment via Garena, and digital financial services with SeaMoney. 

At the start of 2024, Sea Limited’s high target price of $64.53 seemed ambitious. However, the stock skyrocketed 175.9% last year and is now trading near $121 per share. So far this year, SE stock has climbed 13%, significantly outperforming the S&P 500 Index’s 3.4% gain. While larger tech players dominate the headlines, Wall Street continues to view Sea Limited as a “Strong Buy,” with expectations for further growth. Let’s take a closer look at Sea’s growth story.

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Sea Limited’s Rapid Growth Is Impressive

Sea Limited’s revenue has skyrocketed from $826.9 million in 2018 to $13.06 billion in 2023. Wall Street analysts estimate that the company is on track to reach $16.5 billion in revenue for 2024, with a projected 20.8% increase to $20 billion in 2025. Despite its impressive top-line growth, profitability has been a challenge. However, Sea Limited posted earnings of $0.25 per share in 2023, and analysts anticipate another profitable year in 2024.

In the most recent third quarter, revenue surged 30.8% year-over-year to $4.3 billion. The company also reported a profit of $0.24 per share, a significant improvement from the $0.26 loss in the same quarter the previous year. Growth was strong across all three business segments. 

Shopee: E-commerce Platform

Shopee has established itself as a leading e-commerce platform in Southeast Asia and Latin America, offering a diverse range of products, including electronics, fashion, and groceries. Operating under a marketplace model enables both small businesses and major brands to sell their goods. Shopee contributed the most to total revenue in the third quarter. GAAP revenue surged 42.6% year-over-year to $3.2 billion, driven by a 24.2% increase in gross orders. 

Despite facing intense competition from Alibaba’s Lazada and TikTok in Asian markets, Sea has aggressively expanded Shopee by leveraging competitive pricing, promotions, and an integrated logistics network. The company has also enhanced its platform with gamified shopping experiences, live-streaming, and social commerce features to boost user engagement. Shopee’s gross merchandise value (GMV) reached $25.1 billion in Q3. Management remains optimistic about Shopee’s growth, particularly in Asia and Brazil, and sees significant opportunities in markets with low e-commerce penetration.

SeaMoney: Digital Financial Services

Sea’s digital financial services arm, SeaMoney, provides mobile wallets, payment processing, and lending solutions. In the third quarter, the segment’s revenue rose 38% to $615.7 million, while adjusted EBITDA grew by 13.4%. This growth was primarily fueled by an expansion in consumer and SME lending, with active users reaching about 24 million. Sea’s loan book surged 70% year-over-year, highlighting strong demand. While still in its growth phase, the segment has significant potential. Management is optimistic about scaling its credit business and expanding financial services to meet the unmet demand in Asian markets.

Garena: Gaming Platform

Garena, Sea Limited’s gaming division, has been a cash cow for the company, with its flagship game Free Fire ranking among the most downloaded mobile games worldwide. The game has gained significant traction in emerging markets, where mobile gaming adoption is strong. In the third quarter, Free Fire recorded over 100 million daily active users, reflecting a 25% increase. Although bookings rose by 24.3%, gaming revenue growth has begun to slow down due to increasing competition and fluctuations in player engagement. The segment reported an adjusted EBITDA of $314.4 million, accounting for 56.6% of bookings in the quarter.

Beyond Free Fire, Garena expanded its portfolio by launching Need for Speed: Mobile in Taiwan, Hong Kong, and Macau last year. Management stated that the company is also partnering with Tencent to bring “Delta Force, a first-person tactical shooting game, to PC and mobile users in several markets across Southeast Asia, MENA, and Latin America.” To sustain its growth in Garena, Sea needs to continue to develop new titles and secure licensing agreements.

Sea Limited has shifted its focus toward profitability by reducing costs in non-core areas rather than pursuing aggressive expansion. Southeast Asia, one of the fastest-growing digital economies, benefits from rising internet penetration and smartphone adoption. With a strong financial position, including a cash balance of $9.9 billion, the company is well-equipped to expand its operations.

Analysts project Sea Limited’s earnings will surge by 153.4% in 2024 to $1.99 per share and climb another 83% to $3.64 per share in 2025. Despite trading at 32 times its projected 2025 earnings — an apparently high valuation — the company’s rapid expansion across all business segments and strong earnings growth justify the premium.

What Does Wall Street Say About SE Stock?

Most analysts remain confident in Sea Limited’s growth prospects for this year. UOB Kay Hian analyst John Cheong reiterated his “Buy” rating on the stock, setting a price target of $138.70. Cheong highlighted the company’s increasing user engagement in its e-commerce and gaming divisions, along with strong performance in digital financial services, as key drivers for another solid quarter. Additionally, Bernstein, JPMorgan, Jefferies, and DBS also upheld their “Buy” ratings on the stock.

Overall, Wall Street considers Sea Limited a “Strong Buy.” Among the 19 analysts covering SE, 15 rate it as a “Strong Buy,” one as a “Moderate Buy,” and three as a “Hold.” Following last year’s rally, the stock has already exceeded its average price target of $112.29. However, with a high-end estimate of $140, SE still has 17% potential upside over the next 12 months.

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Is SE Stock a Buy Now?

Sea Limited remains a high-growth stock with considerable risk. Investors who are optimistic about the long-term digital transformation in Southeast Asia and Latin America may find SE stock appealing, especially if the company maintains its profitability. For long-term investors willing to tolerate higher risk, Sea Limited presents strong upside potential. However, more conservative investors may prefer to include it as part of a diversified portfolio.

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