What happened
Shares of Sea Limited (SE -2.20%) 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.
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.
