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Will Sea Limited Hit a $1 Trillion Market Cap?

By Taylor Carmichael and Brian Withers – Oct 1, 2021 at 6:00PM

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It's highly likely. Sea is already a mega cap (closing in on a $200 billion valuation) and it's growing fast (158% sales growth in the most recent quarter).

What's your favorite mega-cap stock? One company that jumps to mind is Sea Limited (SE 1.25%). The stock has been on a rampage, running up almost 1,000% in two years. While you might see that sort of amazing growth in a micro cap or a small cap, for a large company to pull it off is really special.

Sea is going after huge market verticals (video gaming, internet commerce, and digital payments), and it can easily hit a trillion market cap before the decade is over. In this episode of "Beat and Raise," Motley Fool Brian Withers and Taylor Carmichael discuss Sea. This clip was recorded on Sept 2.

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They just revealed what they believe are the ten best stocks for investors to buy right now... and Sea Limited wasn't one of them! That's right -- they think these 10 stocks are even better buys.

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Brian Withers: So Taylor, you're bringing an e-commerce giant. Who are you talking about here?

Taylor Carmichael: It's a mega cap. I'm usually the small-cap guy, so me and Lou switch places, I guess. I'm talking about Sea. I don't call them Sea Limited, I call them Sea Unlimited. I don't like that limited part.

Brian Withers: [laughs] That's awesome.

Taylor Carmichael: Sea is this monster out in Southeast Asia, and they started in Singapore and Taiwan and Vietnam. See if I remember them all, Thailand and everything but China, Japan, and Korea basically. All these little countries that you think of as little countries, Malaysia is another one. There are seven of them. All of these islands and small countries, it's about the same size of population as North America, so it's just this huge market on the other side of the world. My family bought Sea a couple of years ago, two, three years ago, at $30 a share. It's now $330 a share. It's three businesses in one. It is the Amazon (AMZN -3.03%) of Southeast Asia with their Shopee division. They have three basic businesses. Their first one was called Garena, which is short for gaming arena. They created games for smartphones, so they're like Activision Blizzard or like any video game company in that sense, except they specialize in mobile games. They're not really doing games for the Xbox or doing games for Sony (NYSE: SONY). They're doing games for your cellphone, and they've designed their games for the smartphones. Unlike the video gaming companies in the U.S., Sea was started, I think, in 2009 or 2008. They basically were started after Apple invented the iPhone and introduced the iPhone. They were really first mover, I guess. They will be the equivalent of Epic Games. They have what's the No. 1 game in the world. It's called, it's not Fortnite ...

Brian Withers: Free Fire.

Taylor Carmichael: Free Fire. Thank you, sir. It's a lot like Fortnite, actually. It's a battle royale game and extremely popular in the world. It's the No. 1 downloaded game on App Annie, for a year or two, it's just been a huge hit. They lead with that game, and they have other games. They get a game from Activision Blizzard, I think. They get games from other third parties, but that's their main game that they created in-house. It's insanely profitable. They have huge profits from that. Then from there, they expanded and created a portal for e-tailing. They created Amazon.com in Southeast Asia. The one difference, they don't have warehouses. All they do is the website and allow third-party people to sell things via their website, and they basically, they've won the battle in Southeast Asia. The fascinating thing is, not only are they the winner in Southeast Asia, which is just an emerging market, a huge growth market. They've now moved around the other side of the world and they are doing the same thing in South America. They're doing the same thing in Brazil. They lead with their game and then people who find the game, they love the game and then they're like, "Hey, we'll give you the 10 percent discount to Shopee, which is our website." They have these different flywheels, and each one builds upon each other ,and it creates this incredible growth story. Their revenue growth, I'm doing this from memory, 170% or something. Triple digit.

Brian Withers: It's triple digits last three quarters for sure.

Taylor Carmichael: Yeah. It's triple-digit revenue growth. They're always trading right near their high forever. We bought shares at $30, we bought shares again at $100. We just bought shares again at $300. I feel like the people that are buying are people who already own it. We just keep buying it because it keeps growing. It's not getting more expensive, that's what's insane about it. The multiple has not gotten bigger. You think all these tech companies with huge 50 multiple, 80 multiple, 100 multiple. They have a 20 multiple, like a 20-25 multiple, and it's been that way for the last -- every quarter. The multiple is not getting bigger, the stock is up 130% or something. The stock growth is just tracking the revenue growth, the multiple's staying the same. This is just an exciting, amazing story. Just the other day I was thinking, "My God, they might end up invading America at some point and just competing with Amazon here." I never would have thought that, it's impossible, but they are taking market share from MercadoLibre in South America, and these guys are monsters. If you haven't heard of Sea or you're not invested in Sea, it's a huge mega cap, $120 billion, they've got huge numbers and yet they're growing at an astronomical rate. I think this is a no-brainer. I think it's going to be a 10-bagger. They're going to be ups and downs, but I think over the next several years, this is going to be a trillion-dollar company.

Brian Withers: Yeah. I know there's a number of Fools who like Sea Limited. It's an extremely popular stock across The Fool. To hear you say that it's still exciting today at this price, I think we'll make many Fools very happy.

10 stocks we like better than Sea Limited
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now... and Sea Limited wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

 

*Stock Advisor returns as of September 17, 2021

 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Taylor Carmichael owns shares of Activision Blizzard, Amazon, Apple, and Sea Limited. The Motley Fool owns shares of and recommends Activision Blizzard, Amazon, Apple, and Sea Limited. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

Stocks Mentioned

Sea Stock Quote
Sea
SE
$59.76 (1.25%) $0.74
Amazon.com Stock Quote
Amazon.com
AMZN
$88.25 (-3.03%) $-2.76

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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