Sea Limited’s SE shares have surged 46% over the past three months, outperforming the Zacks Computer & Technology sector and the Zacks Internet Software industry’s growth of 11.7% and 21.4%, respectively.

The stock has also outperformed its industry peers, including Appian APPN, Radware RDWR and Audioeye AEYE, in the same time frame.

Shares of Appian, Radware and AudioEye have risen 29.5%, 17.7% and 10.9%, respectively, during the same period.

Sea has been benefiting from strong revenue growth, fueled by its core segments, which include e-commerce (Shopee), digital financial services (SeaMoney) and digital entertainment (Garena).

In the third quarter, revenues increased 30.8% year over year, primarily driven by a rise in Gross Merchandise Value (GMV) in the e-commerce segment and expansion in SeaMoney's credit business.

SE’s Top Line Rides on Strong E-commerce

E-commerce revenues reached $3.4 billion in the third quarter of 2024, reflecting robust 41.2% year-over-year growth. This surge was primarily driven by Shopee's strong performance, with gross orders increasing 24.2% and GMV expanding 25.2% year over year.

Shopee demonstrated strong performance in the reported quarter, with significant GMV and order volume growth, sustaining its market leadership across Asia. User engagement remained robust, with average monthly active buyers increasing more than 20% year over year, highlighting the platform's growing popularity and customer retention.

The Garena segment reported strong growth in the third quarter, with total bookings reaching $556.5 million, marking a 24.3% year-over-year increase, driven by Free Fire, which remains one of the most popular mobile games globally. Free Fire achieved more than 100 million daily active users, reflecting an impressive 25% year-over-year growth.

Factors to Drive SE Stock

In the e-commerce business, SE improved its monetization in the third quarter with higher commission and ad take-up rates. Market rationalization across Southeast Asia led to industry-wide increases in commission rates.

In the third quarter, the number of ad-paying sellers increased more than 10% while ad-paying revenue per seller grew more than 25% year over year. Shopee’s ad take rate improved more than 30 basis points from the previous year, with strong potential for further growth.

Shopee was ranked highest among e-commerce platforms for competitive pricing in Asia and Brazil. Investments in integrated logistics have given it a strong edge, enabling cost savings and better service for buyers. Sellers benefit from reliable, cost-effective and one-stop logistics solutions, enhancing overall satisfaction.

SPX Express remains a top logistics provider with wide coverage, faster delivery and cost efficiency. In the third quarter, 50% of SPX orders in Asia were delivered within two days, with costs per order improving in both Asia and Brazil. Additionally, live streaming continues to grow in popularity, strengthening the content ecosystem.

Shopee's recent collaboration with YouTube in Indonesia enables creators to add clickable buttons in their videos for direct purchases. This partnership has now expanded to Thailand and Vietnam, with plans to expand to more markets.

In the digital entertainment business, Free Fire made history in October 2024 by becoming the first online game to collaborate with Thailand's geological organization, featuring the popular baby pygmy hippo, Moo Deng, in the game.

In addition to Free Fire, Garena launched Need for Speed Mobile in Taiwan, Hong Kong and Macau at the end of October 2024. The game quickly became the most downloaded racing game in each of the three markets. Garena is also strengthening its partnership with Tencent to bring Delta Force, a first-person tactical shooter, to PC and mobile users in Southeast Asia, MENA and Latin America.

However, Shopee is facing increased competition in Southeast Asia and Latin America. This intensifying competition is keeping its market share and profitability under pressure in these regions. Additionally, higher operational expenses, including fulfilment and marketing costs, remain a challenge.

Sea’s 2024 Estimate Revisions Reflect Optimism

The Zacks Consensus Estimate for fourth-quarter 2024 revenues is pegged at $4.65 billion, indicating year-over-year growth of 30.4%. The consensus mark for earnings is pegged at 78 cents per share, up 12 cents over the past 60 days.

The Zacks Consensus Estimate for SE’s 2024 revenues is pegged at $16.68 billion, indicating growth of 28.38% from 2023’s figure. The consensus mark for earnings is pegged at $2.11 per share, up 10 cents over the past 60 days.

Zacks Rank

Sea currently carries a Zacks Rank #3 (Hold), which implies investors should wait for a more favorable entry point.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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