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Why Sea Limited Shares Rose 34% Last Month

By Anders Bylund – Jul 3, 2020 at 2:21PM

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The Southeast Asian online services giant continued to rise on the momentum it built from January to May.

What happened

Shares of Sea Limited (SE -2.24%) gained 34.4% in June 2020, according to data from S&P Global Market Intelligence. The Singapore-based e-commerce, payments, and online gaming specialist didn't have much news to share last month, but the stock continued a dramatic climb that tripled Sea's stock price in six months. You could call June's surge a logical continuation of Sea's 44% rise in May.

So what

The Shopee online shopping storefront posted 74% year-over-year revenue growth in May's first-quarter report, while the Garena-branded digital entertainment group saw 30% higher sales. Sea's dual focus on e-commerce services and online games is a perfect recipe for success under the COVID-19 lockdowns that continue to paralyze the global economy in many ways.

Sea Limited's corporate logo, including the tagline: Connecting the dots.

Image source: Sea Limited.

Now what

Sea didn't have much to say last month, but analysts were heaping praise over the company and stock. JPMorgan raised its price target on Sea from $79 to $127 per share near the end of June, followed by a $130 price target from Stephens.

Stephens analyst Jeff Cohen underscored the high-quality demographics in Sea's Southeast Asian target markets and suggested that the company could expand its gaming and e-commerce services to new markets in the region.

This isn't a cheap stock, trading at 22 times trailing sales with negative earnings and cash flows. Sea is expanding its user base and chasing top-line growth with the pedal to the metal, leaving profit-taking for some undefined point many years down the road.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool recommends Sea Limited. The Motley Fool has a disclosure policy.

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