Right now is one of the best times to be an investor. In recent years, many brokerages have done away with commission fees, and a handful even offer fractional shares. That means you can regularly invest small sums of money without worrying about share price or the outsized impact of commissions.
With that in mind, now looks like a good time buy Sea Limited (SE -1.33%). Here's why.
Sea Limited
Sea Limited breaks its business into three segments: Shopee (e-commerce), Garena (video games), and Sea Money (digital finance). The company primarily operates in seven markets across Southeast Asia, one of the fastest-growing economies in the world, though it has also expanded into Latin America.
Image source: Getty Images
In Southeast Asia, Shopee is the leading e-commerce platform by gross merchandise volume (GMV) and total orders. In fact, last year, Shopee received more than twice as many visits as the No. 2 platform, Alibaba's Lazada. That scale is a significant advantage, as buyers and sellers tend to gravitate toward the biggest marketplace (i.e. better selection for buyers, greater audience for sellers).
Sea Money provides digital and mobile wallet services for consumers, enabling them to make purchases both online and offline. It also integrates with Shopee, giving merchants access to payment processing services on the marketplace. This platform reinforces Sea Limited's competitive edge, extending its ability to monetize commerce.
Finally, Garena develops and publishes video games, and provides livestreaming and social features to gamers. Its best-known title, Free Fire, was the most downloaded mobile game worldwide in 2020, according to App Annie. And it was the highest-grossing mobile game in Latin America, Southeast Asia, and India during the first quarter of 2021.
Powered by these advantages, Sea Limited has delivered strong sales growth across all three business segments in recent years.
|
Revenue |
2018 |
2020 |
CAGR |
|---|---|---|---|
|
Shopee |
$269.6 million |
$2.2 billion |
184% |
|
Garena |
$462.5 million |
$2.0 billion |
109% |
|
Sea Money |
$11.5 million |
$60.8 million |
130% |
Source: Sea Limited SEC Filings. CAGR: compound annual growth rate.
If you thought Sea was growing quickly before, the company actually hit the accelerator this year. In the first quarter of 2021, Shopee, Garena, and Sea Money delivered revenue growth of 250%, 111%, and 396%, respectively, a feat made more impressive by the company's $147 billion market cap.
A bright future
More importantly, the company still has strong prospects for future growth. Internet penetration currently sits at 69% in Southeast Asia, according to research from Alphabet's Google, far less than the 94% in North America. But things are moving in the right direction.
Last year, the pandemic accelerated digital adoption, creating 40 million new internet users in the region. As that trend continues, more commerce and payments should take place online, supercharging Sea Limited's business. For perspective, management puts its market opportunity at $115 billion this year, more than 27 times the company's trailing-12-month sales.
Here's the bottom line: Despite its lack of profitability, Sea Limited benefits from a strong competitive edge, extraordinary top-line growth, and an expanding market opportunity. That's why this stock looks like a smart investment.
