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Sea Limited (NYSE: SE) Stock: Smooth Sailing Ahead for Investors?

Tuesday, June 30, 2020 | Sean Sechler
Sea Limited (NYSE:SE) Stock: Smooth Sailing Ahead for Investors?

Sometimes, keeping things simple in the stock market is the best way to profit. If you notice a particular industry or stock that has been regularly gaining, riding the trend can be a very lucrative strategy. For example, take a look at a stock like Sea Limited (NYSE:SE). The e-commerce company’s shares have doubled this year and it isn’t showing signs of slowing down anytime soon.

Sea Limited has become a favorite for investors thanks to market trends related to the coronavirus pandemic and how it is accelerating the growth of the e-commerce and tech sectors. When a company seems to be capitalizing on its opportunity to gain market share and grow its business, investors tend to take notice. There are several great reasons to consider adding shares of Sea Limited even after its recent run. Let’s take a deeper look at this business and why it is set to continue its growth.

Exposure to Three Rapidly Growing Industries

Perhaps the most intriguing thing about Sea Limited stock is the fact that its business has exposure to three rapidly developing industries in the technology world. Adding shares of this Southeast Asian company is almost like buying multiple growing businesses at once. It’s e-commerce platform, digital gaming services platform, and digital payments platform should provide immense revenue for the company in the coming years.

Shopee, Sea’s e-commerce platform, has built a large presence in Southeast Asia and Taiwan and is changing the way that sellers connect with shoppers online. Shopee’s growth has been impressive, to say the least, with Q1 Gross Merchandise Value growth accelerating 74.3% on a year-over-year basis. The company earned $314 million in e-commerce revenue in Q1, which increased by 110.5% year-over-year. This e-commerce growth might just be the beginning, which is why many investors have been adding shares.

The company also reported great Q1 earnings numbers for its digital entertainment business. Its Garena gaming platform, which allows users to access mobile and PC games online, appears to be a winner thus far. Additionally, Sea Limited’s self-developed Free Fire game was the highest-grossing mobile game in Southeast Asia and Latin America in Q1 2020. Sea Limited’s adjusted revenue from digital entertainment rose 30.3% year-over-year to $512.4 million in Q1.

Perhaps the icing on the cake with Sea Limited is its digital financial services network called SeaMoney. With fintech in high demand, it’s payment processing services should see nice growth in the coming quarters. In fact, a record payment volume that exceeded $1 billion in Q1 tells you a lot about how quickly the region is adapting e-payment processing. Combine that with the fact that the company is focused on integrating SeaMoney and Shopee and you could be looking at a massive potential.

Flying Under the Radar

Sea Limited is a great stock to add largely because it has been flying under the radar for many U.S. investors. Since it is an international stock, it simply hasn’t received the same exposure as other tech stocks have lately. Many investors are hesitant to invest in international companies due to their unfamiliarity with foreign markets, but buying into great companies tends to work out in the majority of cases. Sea Limited might just be the best-kept secret in the market at this time.

It can certainly be beneficial to gain some exposure to international markets, particularly if you are building a diversified portfolio. That’s another great reason why Sea Limited is worth a look. With U.S. stocks facing mounting uncertainty related to the economy and the pandemic, scooping up shares of a lesser-known international company with exposure to industries that are benefitting from the coronavirus era makes a lot of sense.

Smooth Sailing?

Although Sea Limited undeniably has a great collection of digital businesses and a strong foothold in its marketplace, the company will have to deal with e-commerce competitors like Alibaba (NYSE:BABA) and Amazon (NASDAQ:AMZN) that will surely focus on increasing their reach in the Southeast Asia region. This is a risk for investors to be aware of, but for now, Sea Limited is expected to continue as the leader in e-com in Southeast Asia.

Additionally, this company has experienced rapid top-line growth but has yet to achieve profitability. It reported a Net Loss of $689 million in Q1 which was mostly due to its heavy spending in sales and marketing. With that said, the pandemic is providing Sea Limited with tons of opportunity, and the business is poised for great things going forward. Just keep the risks mentioned above in mind if you are considering an investment.

Diving Deep into International E-Commerce

If you are looking for exposure to international e-commerce, Sea Limited is one of the best stocks to consider buying. With positive market headwinds like the growth of the digital economy working in its favor, this stock should consider sailing higher in the coming years.

Companies Mentioned in This Article

CompanyBeat the Market™ RankCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
SEA (SE)1.3$117.62flatN/A-55.48Buy$59.00
Alibaba Group (BABA)1.9$223.60flatN/A27.99Buy$247.10
Amazon.com (AMZN)1.5$2,890.30flatN/A138.09Buy$2,708.09

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