Overview
Sea Limited, with its current market cap of $22 billion, has seen significant fluctuations in its stock price. After reaching a peak of $372 in 2021, it subsequently plummeted by as much as 91% in 2023. Nevertheless, the market’s demonstrated willingness to bid the stock higher indicates potential for future growth. However, investors should conduct a thorough assessment of the company’s various business segments before making investment decisions.
Sea Limited’s current business
At first glance, Sea Limited’s three segments appear to offer substantial growth prospects. Sea Money, its fintech arm, has experienced rapid expansion. Shopee, the e-commerce business, dominates the Southeast Asian market despite facing competition from platforms like TikTok. The Southeast Asian market consists of over 600 million consumers, including prosperous countries like Singapore and Taiwan, as well as developing nations such as Thailand and Vietnam. However, the gaming segment, Garena, has struggled recently, with revenue declining following a period of significant growth when Free Fire was the world’s most downloaded mobile game.
To assess Sea Limited’s potential for significant growth, it’s important to consider its market capitalization. With a current market cap of $22 billion, surpassing even Amazon, which stands at $1.5 trillion, it may face challenges in reaching exponential growth. However, companies like Microsoft and Apple, with market caps exceeding $2.2 trillion, demonstrate that achieving such levels is possible.
Financial Performance
Sea Limited’s financial performance is critical in determining its growth prospects. In the first nine months of 2023, the company reported revenue of $9.4 billion, posting a 5% increase compared to the same period last year. However, this growth pales in comparison to the 34% yearly growth rate in the first three quarters of 2022. In Q3, revenue experienced a significant decline of 43%, partially offset by Shopee’s 16% and Sea Money’s 37% gains. Overall, Sea Limited earned $260 million in the first three quarters of 2023.
Analysts predict a modest 12% revenue growth for Sea Limited in 2024, significantly below the levels seen in 2022. While this projection may attract some investors due to the company’s relatively low price-to-earnings (P/E) ratio of 34, it raises questions about the company’s long-term growth potential.
Considering its current status, it is not advisable for investors to view Sea Limited as a guaranteed path to becoming millionaires. Although the company’s business segments suggest substantial growth potential in Southeast Asia, the struggles faced by Garena may hinder its progress. Yet, Sea Limited remains a relatively small company, indicating possible avenues for growth. When considering its modest P/E ratio and projected growth for the following year, owning Sea Limited stock could still yield significant returns for shareholders.