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Why Sea Limited Stock Climbed Today

By Jeremy Bowman – Jul 27, 2020 at 5:00PM

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The Southeast Asian tech company got a boost on a report that its "Free Fire" video game was among the most popular titles last quarter.

What happened

Sea Limited (SE -2.75%) rose 6.6% Monday as investors bid up growth stocks; the Southeast Asian tech company also seemed to benefit from a strong second-quarter performance from one of its digital games.

On the day, the tech-centric  Nasdaq gained 1.67% while the broad-market S&P 500 added 0.74%.

The reception at a Sea Limited office.

Image source: Sea Limited.

So what

There was no particular news driving tech stocks higher Monday, though they seemed to be benefiting from anticipation of quarterly earnings that are due this week from many businesses in the sector, including big names like AppleFacebook, and Amazon. Better-than-expected results from those companies could lift the entire sector further. Sea Limited shares have swung widely in recent days as the Nasdaq has bounced up and down, so it's not too surprising that it made another such a move.

Additionally, App Annie, a closely watched app data research platform, said that the Sea-owned title Free Fire was the third-most-downloaded gaming app in the world in the second quarter, and No. 5 in monthly active users. App Annie said that overall gaming downloads were up 20% from a year ago in the second quarter due to the pandemic, and said that Free Fire, a battle royale game, was the fastest-growing title in the action category.

Free Fire was initially launched in 2017, and was the most downloaded game of 2019. Its strong performance in the second quarter shows it continues to have staying power.

Now what

Though Sea Limited has attracted the interest of investors during the pandemic in part due to its e-commerce and digital payments platforms, its digital gaming division, Garena, is by far the strongest part of the business, contributing more than half of revenue and all of the profits as the e-commerce segment is still losing money. That means that Free Fire is a key driver of the company's performance.

Investors should keep an eye on the title's popularity as the pandemic rolls on. We'll learn more when Sea delivers its second-quarter earnings report in August.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jeremy Bowman owns shares of Amazon, Facebook, and Sea Limited. The Motley Fool owns shares of and recommends Amazon, Apple, Facebook, and Sea Limited and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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