Group 1 - Sea Ltd. (NYSE: SE) shares were trading between $35 and $45 in late 2023, leading to a perception of the company being overlooked by the investing community [1] - A bullish thesis for Sea Ltd. was articulated, suggesting potential for growth despite current market sentiment [1] - The analyst, Louis, is recognized as a leading figure in the investing community, ranking in the top 0.1% according to TipRanks [1]

Company Performance - Sea Limited Sponsored ADR (SE) closed at $126.15, with a +0.82% change from the previous day, underperforming the S&P 500's daily gain of 1.08% [1] - The stock has decreased by 9.73% over the past month, while the Computer and Technology sector has lost 13.17%, and the S&P 500 has declined by 8.26% [1] Upcoming Earnings - The upcoming EPS for Sea Limited is projected at $0.93, representing a significant increase of 342.86% compared to the same quarter last year [2] - Quarterly revenue is expected to reach $4.98 billion, reflecting a 31.45% increase from the previous year [2] Fiscal Year Estimates - For the entire fiscal year, earnings are estimated at $4.17 per share, indicating a +148.21% change from the previous year [3] - Revenue for the fiscal year is projected at $22.15 billion, showing a +30.76% increase compared to the prior year [3] Analyst Estimates - Changes in analyst estimates for Sea Limited are crucial as they reflect the evolving business trends, with positive revisions indicating a favorable business outlook [4] - The Zacks Rank system, which incorporates estimate changes, provides a practical rating system for investors [5] Zacks Rank and Valuation - Sea Limited currently holds a Zacks Rank of 3 (Hold), with the consensus EPS estimate having increased by 0.58% over the last 30 days [6] - The company is trading at a Forward P/E ratio of 30.03, which is higher than the industry average Forward P/E of 27.36 [7] Industry Context - The Internet - Software industry, part of the Computer and Technology sector, has a Zacks Industry Rank of 82, placing it in the top 33% of over 250 industries [7] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [8]

Core Viewpoint - Sea Limited has demonstrated strong stock performance and growth across its key segments, particularly in e-commerce and digital financial services, despite facing challenges in its gaming division and increasing competition in the e-commerce space. Group 1: Stock Performance - Sea Limited's shares have returned 19.8% over the past three months, outperforming the Zacks Computer & Technology sector and the Zacks Internet Software industry's declines of 8.6% and 5% respectively [1] - The company has outperformed industry peers such as Paychex, Radware, and Elastic during the same period [1] Group 2: Financial Performance - In the fourth quarter of 2024, Sea Limited's revenues grew 37% year over year, driven by strong Gross Merchandise Value (GMV) growth in e-commerce and advancements in SeaMoney's digital financial services [2] - E-commerce revenues reached $3.7 billion in the fourth quarter, marking a 41.3% year-over-year increase, with Shopee being the key driver [3] - The digital financial services segment saw revenues rise 55.2% year over year, with consumer and SME loans principal outstanding surpassing $5 billion, driven by SPayLater and cash loans [4] - The digital entertainment segment experienced a 19% year-over-year increase in total bookings, with quarterly active users rising 16.9% and paying users increasing 27.2% [5] Group 3: Strategic Initiatives - Sea Limited is gaining momentum through strategic collaborations, such as the partnership with YouTube, which has significantly enhanced Shopee's ecosystem and led to a six-fold increase in average daily orders in Indonesia [6] - Garena's gaming division has made a strong comeback with high-profile collaborations, including a partnership with "NARUTO SHIPPUDEN," reinforcing Free Fire's dominance in the gaming industry [7] - AI advancements have improved customer service, with AI-powered chatbots boosting customer satisfaction and reducing service costs per contact by nearly 30% year over year [9] Group 4: Challenges - Garena faces rising competition and declining engagement, with active player counts dropping for two consecutive quarters and average revenue per player continuing to decline, resulting in flat revenues of $519 million in the fourth quarter compared to $511 million a year ago [10] - Shopee's e-commerce operations are encountering intense competition from local platforms like Tokopedia, particularly in key markets such as Indonesia, which could impact market share and profitability [11]

Core Viewpoint - Garena remains a profitable segment within Sea Limited, despite being overshadowed by Shopee, and is expected to recover and grow in the coming quarters [1][4]. Performance Overview - Garena experienced a significant decline in performance post-COVID-19, with quarterly active users (QAU) dropping from a peak of 729 million in Q3 2021 to 529 million [2][3]. - By the end of 2023, QAU improved to 618 million in Q4 2024, with bookings increasing by 19% and adjusted EBITDA rising by 30% [3]. User Base and Profitability - Garena maintains a substantial user base with over 600 million quarterly users and more than 100 million daily active users, generating $1.2 billion in adjusted EBITDA in 2024 [4]. - The flagship title, Freefire, is responsible for over 100 million daily active users and saw a 28% increase in DAUs in 2024 [5][6]. Concentration Risk - Garena's reliance on Freefire poses a concentration risk, as user interest could wane, leading to potential revenue declines if no new titles are developed [6][7]. - The absence of a second blockbuster title raises concerns about Garena's game development capabilities compared to competitors like Tencent and Netease [7]. Growth Potential - Despite challenges, Garena is well-positioned for growth, particularly due to Freefire's strength and its expansion into new markets like Africa and India [8][9][10]. - The management is focusing on hyper-localization to enhance user engagement, with initiatives like in-game donations and local esports events [11]. Future Outlook - Garena anticipates double-digit growth in user base and bookings for 2025, indicating a positive short-term outlook [11].

Core Insights - Shopee achieved its first profitable year in 2024, reporting adjusted EBITDA of $156 million, marking a significant shift from previous loss-making years [3][15] - The company experienced a 33% growth in orders, a 28% increase in gross merchandise value, and a 38% surge in revenue, indicating a transition to a more balanced and sustainable growth model [3][4] - Shopee maintains a 48% market share in its operating region, confirming its leadership position in all seven Asian markets and a growing presence in Brazil [8][9] Performance and Strategy - Shopee's pivot from aggressive growth to a more sustainable model involved cost-cutting, exiting certain markets, and raising take rates, which initially impacted market share but has since led to profitability [4][5] - The company is focused on enhancing price competitiveness, improving service quality, and strengthening its content ecosystem to sustain growth momentum into 2025 [11] - Shopee Express, the company's in-house logistics, delivers around 50% of orders within two days, contributing to improved service and reduced logistics costs [12] Future Outlook - The live-streaming segment contributes approximately 15% to Shopee's overall order volume for physical goods, with potential for further growth through partnerships, such as with YouTube [13] - Shopee anticipates a gross merchandise value growth of around 20% in 2025, supported by ongoing improvements in customer experience and retention strategies [13]

Core Viewpoint - Sea Limited is a leading player in the digital economy with significant growth in e-commerce, digital financial services, and digital entertainment, showcasing strong revenue growth and profitability despite being below its all-time high stock price [1][2][10]. E-commerce Segment - Shopee, Sea's e-commerce platform, is the largest in Southeast Asia, with over 10.9 billion orders placed and $100.5 billion spent in the last year [3]. - The company has improved Shopee's efficiency, with nearly half of all orders delivered in two days or less, resulting in lower costs per order [4]. - Revenue from the e-commerce segment grew 41.3% to $3.7 billion in Q4 2024, contributing significantly to the overall revenue [9]. Digital Financial Services - SeaMoney, the digital financial services platform, had 26 million active users at the end of 2024, a 60% increase year-over-year, and a loan book that grew 64% to $5.1 billion [6]. - The platform offers merchant loans and buy now, pay later options, enhancing spending capabilities for both sellers and consumers [5]. Digital Entertainment - Sea's digital entertainment segment, led by the Garena game studio, saw 618 million quarterly active users in Q4 2024, a 16.9% increase from the previous year, but still below the 2021 peak of 725 million [7]. - Revenue from this segment increased by 1.6% to $519.1 million in Q4 2024, despite earlier declines [9]. Financial Performance - Sea generated $5.0 billion in total revenue in Q4 2024, marking a 36.9% year-over-year growth, the fastest rate in nearly three years [8]. - Total revenue for 2024 reached a record $16.8 billion, up 28.8%, with operating expenses increasing only 16.7% to $6.5 billion, allowing net income to grow 175% to $447.8 million [10][11]. - The company maintains a strong balance sheet with $10.4 billion in cash and equivalents, enabling further investment in growth [15]. Valuation and Market Position - Sea's price-to-sales (P/S) ratio has decreased to 4.9, a 47% discount to its average of 9.3 since going public, making the stock more attractive [14]. - Despite recent gains, the stock remains a value opportunity, supported by strong fundamentals and potential for further growth [16].

Core Viewpoint - The article discusses the investment position of Parkev Tatevosian, CFA, and mentions the involvement of The Motley Fool with Sea Limited, highlighting the potential for investment opportunities in the company [1]. Group 1 - Parkev Tatevosian has no position in any of the stocks mentioned [1] - The Motley Fool has positions in and recommends Sea Limited, indicating a positive outlook on the company's prospects [1] - The Motley Fool has a disclosure policy regarding its investment recommendations [1]

Core Insights - Sea Limited's shares increased by 8% following a strong earnings report that exceeded sales expectations [1] - The company reported its second consecutive profitable year with significant improvements in its margin profile [2] Financial Performance - In Q4, Sea's revenue grew by 37%, gross profits increased by 45%, and net income margin improved from -3% to 5% [2] - SeaMoney, the finance unit, achieved a revenue increase of 55% while Shopee became profitable in both Asia and Brazil [3] Operational Success - Sea's digital entertainment division, Garena, saw a 17% growth in quarterly active users and a 19% increase in gross bookings [3] - The overall performance in 2024 marked a significant turnaround compared to the challenges faced in 2023, including layoffs and an unprofitable Shopee unit [4] Market Position - Sea's forward price-to-earnings (P/E) ratio stands at 36, which is lower than peers Shopify and MercadoLibre, with P/E ratios of 42 and 67 respectively [5] - The company is increasingly viewed as a growth stock, driven by its leading units Shopee and Garena, along with the rapidly growing SeaMoney segment [5]

Investment Rating - The report maintains an "Outperform" rating for the company [3][5][14] Core Insights - The company's revenue for Q4 2024 reached $5 billion, representing a 37% year-over-year growth, primarily driven by e-commerce and digital financial services [1][8] - The net profit for the quarter was $2.4 million, with a net profit margin of 5% [1][8] - The adjusted EBITDA margins for e-commerce, gaming, and digital financial services were 4%, 56%, and 29% respectively, showing significant improvement compared to the previous year [1][8] E-commerce Business Summary - E-commerce revenue for Q4 2024 was $3.7 billion, up 41% year-over-year, attributed to a 24% increase in GMV and improved monetization rates [1][9] - The platform's monetization rate increased from 9.8% to 11.2% year-over-year, mainly driven by advertising monetization [1][9] - The company projects a 20% growth in e-commerce GMV for 2025, with continued improvement in profitability [1][9] Digital Financial Services Summary - Digital financial services generated $730 million in revenue for Q4 2024, a 55% increase year-over-year, mainly driven by credit services [2][13] - The adjusted EBITDA for this segment was $210 million, with a profit margin of 29% [2][13] - As of December 31, 2024, total receivables amounted to $5.1 billion, a 64% increase year-over-year, with a non-performing loan rate of 1.2% [2][13] Financial Forecast and Valuation - Revenue forecasts for 2025 and 2026 have been adjusted to $20.2 billion and $23.5 billion, respectively, reflecting a 6% and 9% increase [3][14] - The adjusted profit forecasts for 2025 and 2026 are $1.5 billion and $2.3 billion, with increases of 21% and 24% [3][14] - The target price has been revised to $150-$154, indicating an upside potential of 13%-16% [3][14]

Investment Rating - The report maintains a "Buy" rating for Sea (SE.US) and raises the target price to $165 [4][6]. Core Insights - The company's revenue for Q4 2024 reached $4.95 billion, representing a year-on-year growth of 36.9%, exceeding market expectations by 6.1% [2]. - The adjusted EBITDA for Q4 2024 was $590 million, with an adjusted EBITDA margin of 11.9% [2]. - The adjusted net profit for Q4 2024 was $410 million, with an adjusted net profit margin of 8.3% [2]. - The e-commerce segment showed profitability improvement, with a projected GMV growth rate of 20% for 2025 [2][4]. - Digital financial services revenue grew by 55.2% year-on-year in Q4 2024, driven primarily by credit business [3]. - Digital entertainment revenue turned positive with a 1.2% year-on-year increase in Q4 2024, and the company expects double-digit growth in 2025 [3]. Financial Performance Summary - For FY23, the company reported total revenue of $13.064 billion, with projections of $16.820 billion for FY24 and $20.854 billion for FY25 [5]. - The adjusted EBITDA is expected to grow at a compound annual growth rate (CAGR) of 35% from FY24 to FY27E [4]. - The net profit is projected to increase from $151 million in FY23 to $1.450 billion in FY25 [12]. Market Position and Valuation - The current stock price is $132.31, with a potential upside of 25% to the target price of $165 [7]. - The company has a total market capitalization of $75.726 billion [7]. - The report indicates that the e-commerce business's profitability improvement is expected to drive rapid profit growth for the company [4].