Last year was a disaster for much of the corporate world, in large part due to the adverse economic effects of COVID-19. But there's also no doubt the pandemic helped the gaming, fintech, and e-commerce sectors outperform.

Forced to stay at home, people bought more goods online and spent more time playing games, leading to strong revenue growth for industry e-commerce bellwethers like and Tencent Holdings. More businesses shifted to online sales models and the trend toward cashless payments accelerated, benefiting payments companies like Square. The quickened pace of digital transformation made these stocks big winners, with the stock prices for Square, Tencent, and Amazon rising 250%, 47%, and 74%, respectively, in 2020.

Their strong returns, however, trailed the returns posted by Sea Limited (SE 8.12%). Riding the bullish waves for all three industries -- gaming, e-commerce, and fintech -- Sea Limited's stock price is up 508% from its 2020 lows. 

Investors want to know if Sea's going to keep soaring in 2021. But first, let's see why Sea delivered such mind-blowing returns last year.

Woman holding cash

Image source: Getty Images.

Why share price rose more than sixfold

Since IPO-ing in 2017 at $15 a share, Sea has been nothing short of a runaway success.

Sea's gaming division, Garena, has emerged as the dominant player in Southeast Asia and Taiwan. Sea's online shopping platform Shopee, launched in 2015, is now the leader in e-commerce for that region of the world. That's no mean feat, considering it had to dethrone Alibaba-backed Lazada along the way.

Winning the race for market leadership has resulted in surging growth. Sea's yearly revenue rose from $414 million in 2017 to $2.2 billion in 2019 -- a more than fivefold increase.

In 2020, COVID-19 fired-up Sea's trajectory, as evident in its latest quarterly results. Third-quarter revenue almost doubled year over year to $1.2 billion, driven by swelling gaming and e-commerce incomes. 

Zooming in on Sea's gaming division reveals that the company reached 572 million quarterly active users in that period, a 78% increase. Quarterly paying users, meanwhile, surged 124% to 65 million. These factors propelled a 73% rise in gaming revenue, to $569 million. Sea's e-commerce business also got a shot in the arm as more shopping moved online. Revenue jumped 173% to a record $619 million, helped by a more-than-doubling of gross merchandise volume and a higher take rate.

Besides the strong numbers, Sea also saw its fintech push gain critical traction. Total payment volumes exceeded $2.1 billion in Q3, with 17.8 million users using Sea's mobile wallet services. A breakthrough came when Sea secured a digital banking license in Singapore, paving the way for it to become a leading regional financial services player.

All this has not gone unnoticed. Sea's 500% rally in 2020 means its market value now dwarfs that of DBS Group Holdings, Southeast Asia's biggest bank by assets. 

With its finger in so many pies, Sea is literally swimming in a sea of opportunities. Investor optimism also signals confidence in Sea's unusual business model: Operating at massive losses to win market share. This explains why Sea's shares have outperformed underlying revenue growth.

A Sea of opportunities, but at nose-bleed valuations

According to a study by Alphabet's Google, Temasek, and Bain and Company, Southeast Asia's internet economy -- a market that includes e-commerce, online games, and digital financial services -- is expected to triple in value to $300 billion by 2025.

As the leader in three exciting internet economy sectors, Sea is well-positioned to grow its business over the next few years. Analysts think Sea will deliver growth of 78% in 2021, and 46% in 2022.

I still believe that over the long run (five to 10 years), Sea could deliver returns that trump Amazon's performance. Still, investors rushing in now may end up drowning in Sea's high valuations. 

At $216 a share, Sea trades at over 30 times its trailing 12-month revenue. That's likely a deal-breaker -- considering profitable tech giant Tencent trades at less than half that multiple.

So unless you have a time horizon of at least five years -- and the guts to weather a potentially severe correction -- you might want to hold off getting your feet wet.