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Why Sea Stock Skyrocketed 394.9% in 2020

By Keith Noonan - Jan 8, 2021 at 9:33AM

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The company has fast-growing businesses in two of the world's hottest technology industries.

What happened

Shares of Sea ( SE ) rose 394.9% across last year's trading, according to data from S&P Global Market Intelligence. The stock soared thanks to strong performance for the Singapore-based tech company's video game and e-commerce businesses. 

SE Chart

SE data by YCharts

The coronavirus pandemic shifted commerce, communications, and entertainment to digital channels, and many online retail platforms and video game services posted stellar engagement as a result of the unprecedented conditions. Growth in these categories helped Sea close out 2020 as Singapore and Southeast Asia's most valuable company based on market capitalization.

A miniature rocket launching from someone's hand.

Image source: Getty Images.

So what

Sea's core gaming and e-commerce offerings were already posting strong momentum before the pandemic accelerated the digital shift, and the rush to digital services helped the company crush Wall Street's expectations and deliver explosive stock gains. The ascendant tech giant's hit video game Garena Free Fire was one of last year's top grossing mobile apps, and impressive expansion for the company's Shopee platform powered stellar growth for the overall e-commerce segment.

Sea last published quarterly results in November, and digital entertainment and e-commerce segment revenue surged 72.9% and 173.3% year over year, respectively. Overall revenue for the period climbed 98.7% year over year to hit $1.2 billion, and gross profit for the period roughly doubled to reach $407.6 million. The performance capped a year of a strong earnings reports and helped Sea close out 2020 as one of the tech sector's biggest winners. 

Now what

Sea stock has continued to move higher in January's trading. The company's share price is up roughly 2.5% in the month so far. 

SE Chart

SE data by YCharts

The company expects full-year bookings for its gaming-focused digital entertainment segment to hit $3.1 billion for the recently concluded fiscal year, representing growth of roughly 75.4% compared to 2019. Revenue plus sales incentives for its e-commerce unit are projected to come in at $2.3 billion, up roughly 144.1% from 2019's performance.

Sea now has a market capitalization of roughly $104 billion -- up about 450% from where it was a year ago. That rapid expansion might look intimidating to value-focused investors, but gaming and e-commerce still have room for huge growth in Southeast Asia, and Sea will have opportunities to expand its offerings around the globe. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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