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Sea Limited Rises 112% Year to Date: Too Late to Jump Into the Stock?
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Sea Limited’s (SE - Free Report) shares have returned 111.7% year to date, outperforming both the broader Zacks Computer & Technology sector and the Zacks Internet Software industry. While the broader sector has returned 22.2%, the industry has appreciated 20.2% over the same timeframe.
SE shares are riding on strong top-line growth, driven by its core businesses, which include e-commerce (Shopee), digital financial services (SeaMoney) and digital entertainment (Garena). In the first half of 2024, revenues jumped 19.6% from the year-ago period, driven by 23% year-over-year growth in second-quarter 2024 revenues.
Strong performance from Shopee, SeaMoney and Garena is expected to deliver robust results in the second half of 2024. SE benefits from strong domestic consumption in the Southeast Asia markets. This, along with healthy retail and consumer spending trends, bodes well for SE’s e-commerce business.
The technical indicator is also bullish for Sea Limited as the shares trade above the 50-day moving average, which indicates robust upward momentum.
SE Shares Trade Above 50-Day SMA
Image Source: Zacks Investment Research
However, is it too late to jump into SE Shares? Let’s analyze the strengths and weaknesses.
SE Outperforms Sector YTD
Image Source: Zacks Investment Research
Strong Ecommerce Sales Aids SE’s Prospects
Shopee continued to register strong growth, with gross orders increasing 40.3% to 2.5 billion and Gross Merchandise Value (GMV) rising 29.1% year over year to $2.8 billion in the second quarter of 2024.
Shopee’s momentum is expected to continue given strong domestic consumption and expanding market share. Enhanced price competitiveness, improving service quality (including faster delivery and buyer return refund process), and a strong content ecosystem are major drivers.
Focus on improving ad take rate and ad bidding algorithms to help sellers achieve higher returns on investment bodes well for SE’s prospects. The number of paid sellers increased by more than 20% in the second quarter of 2024.
The launch of Live Ads across Asian markets that allow streamers, both merchants and creators, to insert ads into Shopee Live has gained major adoption, particularly in Indonesia.
SPX Express has helped Shopee in improving delivery speed and simultaneously reducing cost. In the second quarter of 2024, more than 70% of SPX Express orders in Asia were delivered within three days of order placement, with cost per order declining 8% year-over-year.
Sea Limited expects Shopee to report positive adjusted EBITDA in the third quarter of 2024. It now expects Shopee’s full-year GMV growth rate to be in the mid-20s.
SeaMoney’s Strong Loan Book Bodes Well for SE Shares
SeaMoney’s expanding loan book, driven by aggressive penetration in the consumer and SME credit business, is a key catalyst. At the end of the second quarter of 2024, SEA Limited had 21 million consumers and SME loans active users, up roughly 60% year over year.
A larger Shopee user base is helping SE acquire new customers at a low cost. In the second quarter of 2024, Sea Limited registered four million first-time users of its credit products.
Partnerships with more than 1,000 electronic stores to introduce customized SPayLater loans for mobile phone sales are expanding the Off-Shopee credit user base in Indonesia.
Garena’s Free Fire continues to benefit from a strong user base. Sea Limited is set to launch Need for Speed: Mobile in collaboration with Tencent (TCEHY - Free Report) and Electronic Arts (EA - Free Report) , which will significantly enhance SE’s digital entertainment offerings and market presence.
2024 Estimate Revision Shows Upward Movement
The Zacks Consensus Estimate for third-quarter 2024 revenues is pegged at $4.05 billion, indicating year-over-year growth of 17.1%. The consensus mark for earnings is pegged at 59 cents per share, up by a couple of cents over the past 60 days.
The Zacks Consensus Estimate for SE’s 2024 revenues is pegged at $16.25 billion, indicating growth of 25.08% over 2023’s reported figure. The consensus mark for earnings is pegged at $2.01 per share, up by a penny over the past 30 days.
The Value Score of C suggests a stretched valuation at this moment.
Sea Limited stock is currently trading at a premium with a forward 12-month Price/Sales of 2.73X compared with the industry’s 2.68X.
P/S Ratio (F12M)
Image Source: Zacks Investment Research
SE Shares: Buy, Sell or Hold?
Sea Limited’s focus on expanding its paid ad seller base, improving quality control for e-commerce users, SeaMoney’s increasing consumer and SME credit users and strong adoption of Garena’s Free Fire are major long-term drivers. Investors who already own the stock might expect the company’s growth prospects to be rewarding over a longer term.
However, stretched valuation at this moment is a concern. The evolving competitive landscape with growing cross-border competition from the likes of PDD Holdings (PDD - Free Report) and Coupang is expected to keep margins under pressure.
Image: Bigstock
Sea Limited Rises 112% Year to Date: Too Late to Jump Into the Stock?
Sea Limited’s (SE - Free Report) shares have returned 111.7% year to date, outperforming both the broader Zacks Computer & Technology sector and the Zacks Internet Software industry. While the broader sector has returned 22.2%, the industry has appreciated 20.2% over the same timeframe.
SE shares are riding on strong top-line growth, driven by its core businesses, which include e-commerce (Shopee), digital financial services (SeaMoney) and digital entertainment (Garena). In the first half of 2024, revenues jumped 19.6% from the year-ago period, driven by 23% year-over-year growth in second-quarter 2024 revenues.
Strong performance from Shopee, SeaMoney and Garena is expected to deliver robust results in the second half of 2024. SE benefits from strong domestic consumption in the Southeast Asia markets. This, along with healthy retail and consumer spending trends, bodes well for SE’s e-commerce business.
The technical indicator is also bullish for Sea Limited as the shares trade above the 50-day moving average, which indicates robust upward momentum.
SE Shares Trade Above 50-Day SMA
Image Source: Zacks Investment Research
However, is it too late to jump into SE Shares? Let’s analyze the strengths and weaknesses.
SE Outperforms Sector YTD
Image Source: Zacks Investment Research
Strong Ecommerce Sales Aids SE’s Prospects
Shopee continued to register strong growth, with gross orders increasing 40.3% to 2.5 billion and Gross Merchandise Value (GMV) rising 29.1% year over year to $2.8 billion in the second quarter of 2024.
Shopee’s momentum is expected to continue given strong domestic consumption and expanding market share. Enhanced price competitiveness, improving service quality (including faster delivery and buyer return refund process), and a strong content ecosystem are major drivers.
Focus on improving ad take rate and ad bidding algorithms to help sellers achieve higher returns on investment bodes well for SE’s prospects. The number of paid sellers increased by more than 20% in the second quarter of 2024.
The launch of Live Ads across Asian markets that allow streamers, both merchants and creators, to insert ads into Shopee Live has gained major adoption, particularly in Indonesia.
SPX Express has helped Shopee in improving delivery speed and simultaneously reducing cost. In the second quarter of 2024, more than 70% of SPX Express orders in Asia were delivered within three days of order placement, with cost per order declining 8% year-over-year.
Sea Limited expects Shopee to report positive adjusted EBITDA in the third quarter of 2024. It now expects Shopee’s full-year GMV growth rate to be in the mid-20s.
SeaMoney’s Strong Loan Book Bodes Well for SE Shares
SeaMoney’s expanding loan book, driven by aggressive penetration in the consumer and SME credit business, is a key catalyst. At the end of the second quarter of 2024, SEA Limited had 21 million consumers and SME loans active users, up roughly 60% year over year.
A larger Shopee user base is helping SE acquire new customers at a low cost. In the second quarter of 2024, Sea Limited registered four million first-time users of its credit products.
Partnerships with more than 1,000 electronic stores to introduce customized SPayLater loans for mobile phone sales are expanding the Off-Shopee credit user base in Indonesia.
Garena’s Free Fire continues to benefit from a strong user base. Sea Limited is set to launch Need for Speed: Mobile in collaboration with Tencent (TCEHY - Free Report) and Electronic Arts (EA - Free Report) , which will significantly enhance SE’s digital entertainment offerings and market presence.
2024 Estimate Revision Shows Upward Movement
The Zacks Consensus Estimate for third-quarter 2024 revenues is pegged at $4.05 billion, indicating year-over-year growth of 17.1%. The consensus mark for earnings is pegged at 59 cents per share, up by a couple of cents over the past 60 days.
The Zacks Consensus Estimate for SE’s 2024 revenues is pegged at $16.25 billion, indicating growth of 25.08% over 2023’s reported figure. The consensus mark for earnings is pegged at $2.01 per share, up by a penny over the past 30 days.
Sea Limited Sponsored ADR Price and Consensus
Sea Limited Sponsored ADR price-consensus-chart | Sea Limited Sponsored ADR Quote
SE Stock is Overvalued
The Value Score of C suggests a stretched valuation at this moment.
Sea Limited stock is currently trading at a premium with a forward 12-month Price/Sales of 2.73X compared with the industry’s 2.68X.
P/S Ratio (F12M)
Image Source: Zacks Investment Research
SE Shares: Buy, Sell or Hold?
Sea Limited’s focus on expanding its paid ad seller base, improving quality control for e-commerce users, SeaMoney’s increasing consumer and SME credit users and strong adoption of Garena’s Free Fire are major long-term drivers. Investors who already own the stock might expect the company’s growth prospects to be rewarding over a longer term.
However, stretched valuation at this moment is a concern. The evolving competitive landscape with growing cross-border competition from the likes of PDD Holdings (PDD - Free Report) and Coupang is expected to keep margins under pressure.
Sea Limited currently carries a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.