The stock market is dynamic, and the companies that appear at the top shelf of Wall Street might not even be in the top 100 in the coming decades. But, on the flip side, some stocks might not be appealing enough to investors today but can be among the 10 largest stocks in two decades. One such stock is Sea Limited (NYSE: SE).
Expert recently included Sea Limited in the list of largest stocks on Wall Street by 2035. And the reasons are obvious- consistent mission of innovating itself while providing lucrative returns to its investors.
This Singaporean company, registered in 2009, is an internet company that actually has multiple business segments- eCommerce, eSports, mobile games, digital payment and banking, and artificial intelligence. However, its three major revenue-generating verticals are digital payment, eCommerce, and gaming. After a relentless rapid growth year-over-year in these segments, Sea Limited has recorded 250% growth since the beginning of 2018, making it a multibagger.
The company recently released its Q1 earnings for 2021, and every investor should take a note here. Companies GAAP revenue spiked by 146.7% year-over-year at $1.8 billion. Total adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) stood at $88.1 million, a significant growth from $69.9 million in Q1 2020.
So what is driving these unreal returns for Sea Limited, and why should you invest? Let’s find out.
Star segment of Sea Limited- Garena
If you haven’t heard of Garena before, it is a battle royale game launched in 2017 under Sea’s digital entertainment unit. Sea Limited is increasingly dominating Latin America and Southeast Asia, and Garena is a hit in these regions. Launched in 2012, Garena was initially rolled out as a gaming platform with an interface like a social messenger. It allowed gamers to communicate through one-on-one chat or in groups, see their activities, including in-game purchases, etc.
Tapping the market in the most indigenous way possible, Sea Limited, under its Garena flagship, rolled out local-language editions of Fifa Online, League of Legends, and other similar mobile games.
But the real groundbreaker emerged in 2017, Genera Free Fire.
In 2020, the digital entertainment unit of Sea Limited recorded a 78% growth in revenue at $2 billion due to the popularity of Garena Free Fire. However, this is not the best part. What drives analysts’ optimism is the fact that this wasn’t one-time growth for Garena. The flagship continues to yield competitive figures. In Q1 2021, the digital entertainment unit recorded revenue worth $781 million, a 111% growth year over year.
Shopee- the eCommerce pioneer for SE
The eCommerce vertical of Sea Limited was the winner in Q1 2021 performance. At $922 million, revenues for Shopee grew by 250% year-over-year. This number replaces Alibaba’s Lazada with Shopee as Southeast Asia and Taiwan’s largest eCommerce platform.
Shopee is an open eCommerce platform that allows people and companies to buy and sell online. The USP of this unit of SE is its logistic system that enables quick delivery at a lesser cost. Recently, the company’s CEO, Forrest Li, indicated that Shopee is now expanding its outreach to Brazil by strengthening its market leadership.
Definitely a “buy”
Sea Limited is one of the leading players of seven markets combined- Singapore, Thailand, Indonesia, Philippines, Taiwan, Malaysia, and Vietnam. The company’s current market valuation stands at $131.48 billion with $937.5 million in operating cash flow. SE has a bright future in the market if it keeps innovating itself to provide solutions on a more local level in regions while still expanding its horizons overseas. While COVID-19 might have helped accelerate the company’s popularity last year, the financials and vision of its leadership are solid enough to believe that it will continue growing after the pandemic.