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Why Sea Limited Stock Was Gaining Today

By Jeremy Bowman – Updated Oct 6, 2020 at 4:26PM

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The Southeast Asian tech company got a bump from an analyst upgrade.

What happened

Shares of Sea Limited (SE 7.58%) were climbing today after the Southeast Asian gaming and e-commerce company got a bullish rating from UBS with a Street-high price target of $200.

Shares hit an all-time on the news, and the stock closed 3.6% higher on Tuesday. Shares had gained as much as 6.6% earlier in the session, but pulled back when President Trump tweeted that he would no longer negotiate with Democrats over a second stimulus package, delaying it until after the election. As a foreign company that does most of its business in Southeast Asia, Sea should be unaffected by the decision.

The reception desk at Sea Limited headquarters.

Sea Limited headquarters. Image source: Sea Limited.

So what

UBS analyst Navin Killa initiated coverage on Sea this morning with a buy rating, arguing that the company's gaming and e-commerce platforms will benefit from a strong secular shift online. Killa also touted the company's leadership in those segments, which will continue to fuel brisk growth.

Killa is the latest market-watcher to jump on the Sea bandwagon. The stock is now up more than 400% over the last year, and has been one of the big winners during the coronavirus pandemic. As an operator of both a digital gaming platform, under the Garena brand, and the Shopee e-commerce business, Sea is well insulated from the economic effects of COVID-19, and is in position to benefit from pandemic-related shifts, with more time at home driving increases in online shopping and video gaming.

In the most recent quarter, revenue nearly doubled to $1.29 billion, rising 93% from a year ago, and the company posted an adjusted EBITDA profit of $7.7 million, up from a loss of $11 million.

Now what

Sea is a stock that can do little wrong this year. As a digital gaming and e-commerce company based in Singapore, the company is getting a tailwind from the pandemic-related shift in shopping habits and is protected from any volatility in the U.S. related to the election, stimulus negotiations, or the potential for a double-dip recession.

With a market cap of $80 billion, it will get harder for the stock to record big gains, but it's clear why it has been so popular this year.

Jeremy Bowman owns shares of Sea Limited. The Motley Fool owns shares of and recommends Sea Limited. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Sea Limited Stock Quote
Sea Limited
$58.37 (7.58%) $4.11
UBS AG (USA) Stock Quote
$18.44 (0.99%) $0.18

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