Sea Limited Stock Popped 20% After Earnings. Is It Too Late to Buy?

Yahoo

a day ago

Key Points
Sea Limited has gone from a money-losing company to a highly profitable business in just a couple of years.
Its recent earnings show continued progress, and patient investors have been handsomely rewarded.
With the stock at a multiyear high, Sea Limited could still be an attractive investment.
10 stocks we like better than Sea Limited ›
It wasn't too long ago that Southeast Asia-based Sea Limited (NYSE: SE) was essentially left for dead by investors. For example, at the end of 2022, overall revenue growth was just 7%, and the business had burned through billions of dollars in cash in the prior 12-month period. Although the company's e-commerce business was doing quite well, the long-established digital entertainment business was hemorrhaging active users and saw bookings plunge by 18%. For the full year of 2022, the company posted a net loss of $1.7 billion.
However, the company did a phenomenal job of turning things around. In 2024, all three business segments grew, and overall revenue increased by 28%. Sea posted a $448 million profit for the full year, and the business was firing on all cylinders. Investors were handsomely rewarded, and the stock gained 162% last year.
Sea just reported its second-quarter earnings, and the results sent Sea spiking even higher. With shares already up another 65% in 2025, is it too late to add shares of this excellent business to your portfolio?
Sea's second quarter was a strong one
Sea's Q2 results were much better than expected, and a quick rundown of the key numbers shows just how well this business is doing.
First, all three main business segments did well:
The Shopee e-commerce business produced 34% year-over-year revenue growth.
The Monee financial service business saw loan principal balances rise by 94% compared with a year ago. Not only that, but the non-performing loan ratio of just 1% is remarkably low and has improved in recent quarters.
The Garena digital entertainment (gaming) platform grew bookings by 23% year over year, and management is guiding for 30% full-year growth in bookings.
Overall, Sea's revenue increased by 38% compared with last year's Q2.
Not only did all three businesses grow, but profitability is leaps and bounds ahead of where it was a year ago. Gross profit increased by 50% year over year, and net income surged from $79.9 million a year ago to $414.2 million. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) grew by 85%, including rapid growth from all three segments, and Sea now has $10.6 billion in cash on its balance sheet.
Is Sea's stock too expensive?
To be sure, Sea Limited is not a cheap stock. At the current share price, it trades for about 45 times forward earnings expectations. However, with revenue growth of nearly 40% and rapidly expanding margins, there's a solid case to be made that the valuation is completely justified.
On the e-commerce side, as the dominant platform in Southeast Asia, Shopee has a ton of potential to deepen relationships with customers (think about how your relationship with Amazon (NASDAQ: AMZN) has evolved over the past 15 years). Plus, the Monee fintech platform is expanding into several different verticals, such as buy-now-pay-later (BNPL) lending, and its ecosystem could be in the very early stages of growth.
Sea is a far more efficient company than it was a few years ago and has done a great job of growing at a rapid pace without burning through capital. If the company can continue to keep its momentum going, there could still be plenty of upside potential in the years to come.
Should you buy stock in Sea Limited right now?
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Matt Frankel has positions in Amazon and Sea Limited. The Motley Fool has positions in and recommends Amazon and Sea Limited. The Motley Fool has a disclosure policy.
Sea Limited Stock Popped 20% After Earnings. Is It Too Late to Buy? was originally published by The Motley Fool