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Why Sea Limited Stock Popped 5% This Morning

By Rich Smith – Aug 19, 2020 at 12:33PM

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Sales doubled in Q2. Analysts like that a lot.

What happened

One day after Sea Limited (SE -0.28%) reported market-beating results featuring a more than 100% gain in revenue year over year (sparking a surge in its stock price), shares of the Singapore-based e-commerce company are marching higher once again -- up 3.1% as of 11:35 a.m. EDT today.

You can thank Wall Street for that.

An upward-trending arrow over the numbers 2020 increasing in size

Image source: Getty Images.

So what

So far today, StreetInsider.com reports no fewer than three separate analysts raising their price targets on Sea stock in response to yesterday's news. Stifel Nicolaus thinks the stock is now worth every penny of the $150 share price that it currently carries (up from an earlier valuation of $68 a share). Goldman Sachs now believes Sea Limited is worth $175. And right in the middle is Piper Sandler.

In a note covered by TheFly.com today, investment bank Piper Sandler hails Sea's "strong" Q2 results and predicts that a "secular rising tide" in the businesses of online gaming, e-commerce, and digital payments will drive "strong near-term growth, followed by long-term profitability" for Sea Limited stock.

Now what

Admittedly, Sea is not profitable yet. According to data compiled by our friends at S&P Global Market Intelligence, Sea lost $393 million last quarter, for a total of $1.2 billion over the past 12 months.

That being said, free cash flow at the company was an incredibly strong $248 million in Q2 -- easily the best cash quarter Sea has ever produced. If the company can prove that Q2 was no fluke but the start of a trend of profitable and accelerating growth, Sea Limited stock just might be worth what investors are paying for it today.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Sea Limited. The Motley Fool has a disclosure policy.

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Sea Limited Stock Quote
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