Should You Buy, Sell or Hold Sea Limited Stock at P/S of 3.68X?

Core Insights - Sea Limited (SE) shares are currently overvalued with a Value Score of F, trading at a forward 12-month Price/Sales ratio of 3.68, above its median of 2.62 and the industry's 3.11 [1][16] - SE shares have surged 27.2% year-to-date, outperforming the broader Zacks Computer & Technology sector's return of 3.5% and the Zacks Internet - Software industry's rise of 18.4% [3][4] - The company's strong performance is driven by consistent top-line growth in its core segments: e-commerce (Shopee), digital financial services (SeaMoney), and digital entertainment (Garena) [6][7] E-Commerce Segment - Shopee dominates the e-commerce space with a 25% year-over-year increase in gross merchandise value (GMV), indicating significant revenue growth [8] - The platform has improved monetization by optimizing market dynamics, resulting in higher commission rates and enhanced profitability [9] - In Q3, Shopee's loan book grew 70% year-over-year, with 4 million first-time borrowers added, reaching 24 million active loan users [10] Digital Financial Services - SeaMoney's growth is supported by the increasing number of active loan users and stable non-performing loan ratio at 1.2% [10] - The expansion of SPayLater has facilitated engagement with first-time borrowers, enhancing the financial services segment [10] Digital Entertainment Segment - Garena's digital entertainment segment saw total bookings increase by over 24% in Q3 2024, driven by the success of Free Fire, which has over 100 million daily active users [12] - Free Fire's user base grew by 25% year-over-year in Q3 2024, showcasing strong engagement and acquisition [12][13] - Garena is enhancing its gaming portfolio through partnerships, including a collaboration with Tencent to bring Delta Force to various regions [14] Financial Estimates - The Zacks Consensus Estimate for 2025 revenues is $21.01 billion, indicating a year-over-year growth of 24.18$4.05 per share, reflecting an 81.47% year-over-year increase [15] Market Challenges - Sea Limited faces rising competition in e-commerce, particularly in Southeast Asia, and the need for sustained investment in logistics and live streaming [16] - The company's stretched valuation remains a concern for investors [16]