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Why Sea Limited Could Be a Top Growth Stock for the Long Term

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Sea has been going gangbusters and has lots of options to continue growing for a long time.

The pandemic has accelerated e-commerce, digital payments, and gaming adoption in emerging markets, and Sea Limited (SE 4.26%) has been a big beneficiary. The company is growing rapidly on multiple fronts and has no shortage of opportunity ahead of it. In this Motley Fool Live segment from "The 5" recorded on Oct. 8, Fool.com contributors Jason Hall and Jeremy Bowman discuss the long-term tailwinds working in Sea's benefit.

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Jeremy Bowman: I'm going to introduce a third company that has some exposure to Brazil, mostly in Southeast Asia, and that's Sea Limited. It's another favorite of Fooldom. This is a company, it's really been on the warpath during the pandemic and the stocks done phenomenally, and it has three businesses, they are all pandemic winners and I think and three great long-term growth stories. First it has digital gaming, digital entertainment, its online gaming business is Garena. Its most popular game is Free Fire. I'm not a big gamer, but I don't know if either of you guys know that one, but it's like one of the top games in Latin America, I believe in other parts of the world, over 1 billion downloads on Google Play. It seems like a lot of people like it.

Jason Hall: That's a lot.

Bowman: Yeah. [laughs] I think that's a lot. I don't think that's the same people downloading it 50 times. Then they have e-commerce, which is Shopee, is what that business is called. What I like about that, they're based in Singapore. Their core markets are in Singapore, Malaysia, Indonesia, that part of the world. These are a lot of mostly island nations. E-commerce isn't so easy there. You can't just put everything on a truck the way you do in this part of the world. They've built out a logistics setup that's going to be hard to match. I think they have a pretty good competitive advantage there. Alibaba's Lazada is their closest competitor there.

Just to give you some numbers on these businesses in the recent quarter, digital entertainment revenue up 65% to $1.2 billion. E-commerce. Remember this is a quarter that lapped the beginning of the pandemic. Their e-commerce revenue was up 161% to 1.2 billion. That's after lapping the quarter that we had the lockdown. You'll remember Amazon's second-quarter report the stock plunged because they were like, guys hold your horses, we can't do this every quarter. We had a pandemic boom and it's over now. That's not the case with Sea.

Then the third business is more of an emerging business and that's SeaMoney, that's another digital payment platform. Strong growth there in the most recent quarter of total payment volume up a 150% to $4.1 billion. I think altogether the company is expensive. It's worth nearly $200 billion, but you've got a lot of great growth for the news there. They're staying in Brazil and Latin two essentially cores. You're looking to add to some international, some international flavor. I think Sea Limited is a good way to do it.

Hall: I think their corporate motto for at least like their investor moderate should be Sea Limited, when one megatrend is not enough. It's incredible the things and they're related, I think that's interesting. With Latin America and with Southeast Asia is just the trends, the number of people that are moving into the middle-class and those areas, they're generally young. Their average age is very low, so there's just so many positive mechanics that are behind the reason that these businesses, the tailwinds are just so good. That's a fun one.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Nicholas Rossolillo owns shares of Alibaba Group Holding Ltd. and Alphabet (C shares). The Motley Fool owns shares of and recommends Alibaba Group Holding Ltd., Alphabet (A shares), Alphabet (C shares), Amazon, and Sea Limited. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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