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Why Sea Limited Stock Gained 14% in July

By Jeremy Bowman – Aug 10, 2020 at 7:56PM

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The tech stock saw surging growth in the second quarter.

What happened

Shares of Sea Limited (SE 0.09%) finished last month up 14%, according to data from S&P Global Market Intelligence. There was little company-specific news driving shares of the Southeast Asian tech company higher, but the stock seemed to benefit from macroeconomic developments and bullish momentum in e-commerce stocks during the month.

As the chart below shows, the stock's movement was erratic, but a surge at the end of the month gave it double-digit gains for July.

^SPX Chart

^SPX data by YCharts

So what

Sea Limited shares surged to start the month as Stephens initiated coverage with an overweight rating and a price target of $130. Analyst Jeff Cohen noted "very favorable demographics" in its home region, and strong prospects for all three of its business segments: digital gaming, e-commerce, and online payments.

The reception desk at the Sea Limited office.

Image source: Sea Limited.

The following week, the stock climbed again on another bullish analyst note as Citigroup raised its price target from $79 to $138. Analyst Alicia Yap noted strong growth in its Shopee e-commerce marketplace and Garena gaming platform from the effects of the coronavirus pandemic. Yap wrote that those shifts would be structural, helping to accelerate the company's long-term growth. The same day, App Annie said that Garena's Free Fire was one of the top-performing mobile gaming apps in the world in the second quarter, ranking No. 3 in downloads and No. 5 in monthly active users.

Finally, at the end of the month, the stock gained in synchrony with several strong earnings reports from e-commerce stocks, including Shopify and Amazon.

Now what

Sea Limited has been among the better-performing stocks on the market this year, gaining 206% year-to-date. Its digital gaming, e-commerce, and online payment businesses are all well-positioned to thrive during the pandemic. Given the stock's momentum and the company's positioning, investors are expecting the company to deliver a strong earnings report on August 18.

Analysts see revenue jumping 72.5% to $1.06 billion, and its loss per share narrowing from $0.52 to $0.42.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman owns shares of Amazon and Sea Limited. The Motley Fool owns shares of and recommends Amazon, Sea Limited, and Shopify 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.

Stocks Mentioned

Sea Limited Stock Quote
Sea Limited
$61.13 (0.09%) $0.06
Citigroup Stock Quote
$45.08 (0.86%) $0.39 Stock Quote
$89.56 (-0.88%) $0.79
Shopify Stock Quote
$38.59 (-0.12%) $0.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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