Sea Limited Rises 20% in 3 Months: Should You Buy or Hold the Stock?

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$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]