Sea Limited (SE) is an Indonesian tech company that operates through a variety of segments. Sea has a foothold in digital entertainment, e-commerce, and fintech.
Bank of America (BAC) recently chose Sea as one of its top e-commerce picks, and I am bullish on the stock as well. (See Analysts’ Top Stocks on TipRanks)
Growth at any Price
Sea’s stock is listed as an American Depositary Receipt, but the underlying company’s operations are based in Asia. First of all, the Asian stock markets aren’t drawing similar parallels to the U.S..
Apart from China, emerging Asian markets are still considered to be “growth at any price” options.
Indonesia’s market cap to GDP is currently trading at -48.1%, and its GDP has grown by 5.6% per year for the past eight years. It’s anticipated that the region’s GDP growth will revert to historical averages after a pullback of 0.7% in 2020, and a recovery of 7.7% in 2021.
If you compare this data to the broader market, you’ll be able to see the value gap.
Global markets are considered significantly overvalued, as market caps are trading at a 204.7% premium to GDPs. With the U.S. stocks’ market cap being at 200% of GDP, some asset managers may want to diversify capital away from U.S. companies, and Indonesian companies such as Sea are a likely target.
Momentum, Earnings
Sea stock looks like a momentum play. It’s trading above its 10-, 50-, 100-, and 200-day moving averages.
Momentum strategies are highly effective, but you need an asset that’s producing exponential growth. Sea certainly does qualify as a high growth asset; its three-year CAGRs for revenue, tangible book value, and assets have grown by 130.5%, 162.6%, and 162.6%, respectively.
Furthermore, Sea has a history of beating analysts’ revenue targets. The firm has posted revenue beats in 15 of its last 16 quarters, certainly driving stock momentum.
In its latest release, the tech company blasted past its Q2 earnings expectations with year-over-year revenue growth of 158.5%.
Year-over-year highlights included quarterly active users increasing by 45.1%, quarterly paying users growing by 84.8%, and average bookings increasing by 14%.
Asian e-commerce, digital entertainment, and fintech industries are anticipated to grow at 18.5%, 13.5%, and 81.2%, respectively, over the next five years, a positive industry outlook for Sea.
Wall Street’s Take
Wall Street thinks Sea stock is a Strong Buy, and has an average price target of $376.46. There have been 13 Buy ratings on the stock in the past three months.
Concluding Thoughts
Sea remains a growth stock. The firm is well diversified in hypergrowth industries, and holds strong footholds in each.
Disclosure: At the time of publication, Steve Gray Booyens did not have a position in any of the securities mentioned in this article.
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