Sea Limited (NYSE:SE) has seen its stock price reach $100 on the New York Stock Exchange, following the company’s recent mixed Q2 earnings report. The Singaporean-based tech conglomerate, known for operating Garena, Shopee, and SeaMoney, experienced a 12% increase in its shares after the earnings announcement. This significant growth comes after a period of investor skepticism towards Sea stock, which has now turned into bullish sentiment.
The company’s performance in Q2 was impressive, with Sea reporting a record Revenue of $3.8 billion, marking a 23% year-over-year increase and surpassing analyst estimates by nearly $90 million. This strong growth is particularly notable in Southeast Asia, a challenging market where Sea has managed to maintain competitive moats and demonstrate stellar execution under its management.
Shopee, one of Sea’s key segments, delivered Revenue of $2.8 billion in Q2, up 34% year-over-year. The growth was primarily driven by a GMV of $23.3 billion, a 29% increase year-over-year, and Gross Orders of 2.5 billion, up 40% year-over-year. Of particular significance is the Core Marketplace Revenue, which saw a 41% year-over-year increase to $1.8 billion, indicating strong monetization trends within the segment.
SeaMoney, another integral part of Sea’s business, generated $519 million in Revenue in Q2, up 21% year-over-year. The segment’s growth was driven by its consumer and SME credit business, which saw loans of $3.5 billion, a 40% year-over-year increase. SeaMoney’s focus on improving credit underwriting capabilities is reflected in the segment’s improving NPL90+ ratio, which decreased to 1.3% in Q2.
Garena, Sea’s gaming division, rebounded from its performance in Q2 the previous year, with Bookings growing 21% year-over-year to $537 million. The growth was mainly attributed to Free Fire, which was the most downloaded mobile game globally in Q2, boasting over 100 million daily active users throughout the quarter.
Sea’s financial health remains robust, with $6.0 billion in Cash and Short-term Investments and $4.2 billion in Total Debt, resulting in a Net Cash position of approximately $1.8 billion. The company’s Operating Cash Flow was $618 million in Q2, with an OCF Margin of 16%, demonstrating ongoing financial resilience and positive cash flow generation.
Despite the recent run-up in Sea’s stock price, the company continues to trade at low valuations, with its stock priced at only 3.0x Revenue. Analysts have set a price target of $82 per share, while some, including the author, have a base-case price target of $119 per share, indicating significant upside potential.
Looking ahead, Sea is poised for further growth and profitability, with management focusing on capitalizing on digital transformation opportunities in the Southeast Asian economy and other developing markets. The company’s strong fundamentals, improving financial health, and dominant market position position it well for continued success in the future.
In conclusion, Sea Limited’s recent performance and outlook suggest a promising future for the company, with potential for further stock price appreciation and value creation for shareholders. As the company continues to execute on its growth strategy and capitalize on market opportunities, investors can look forward to continued success and value creation in the long term.
