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My Best Monster Growth Stock For 2022 and Beyond

By Jamie Louko – Dec 19, 2021 at 7:10AM

Key Points

  • Sea Limited’s products are seeing dominance in its core markets.
  • The company is using its success to become a global brand.
  • After a mix of strong revenue growth and share-price dips, Sea’s valuation is incredibly appealing.

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Despite being worth over $125 billion, this company has plenty of growth ahead of it.

Most technology growth stocks experienced a major slowdown in 2021 because revenue was pulled forward by the pandemic. As a result, these companies are forecasting a normalized 2022, which many investors are not happy about. 

However, Sea Limited (SE 4.66%) is still seeing triple-digit growth even after the reopening of various parts of the world. Its e-commerce business is exploding relative to 2020 quarters where consumers could only buy things online. I believe the company can continue pulling the right levers to maintain this success into 2022 and beyond. Here's why.

Smiling person grocery shopping online.

Image source: Getty Images.

Sea Limited started as a gaming company in Singapore. With its first product -- Garena -- the company allowed developers to create mobile video games. Now, Sea Limited has gaming operations in over 130 markets, and it now has two additional business segments: e-commerce and fintech.

Shopee, its e-commerce arm, is just six years old, yet it is a leading e-commerce platform in multiple countries and is used in 15 countries total. SeaMoney is also quite young -- just seven years old -- but it has become a dominant solution in Southeast Asia, with numerous offerings.

Dominance in its core geography

In all three of its businesses, Sea Limited is dominating its core market: Southeast Asia. Garena's hit mobile battle royale game, Free Fire, was the highest-grossing mobile game in Southeast Asia, Latin America -- its second core geography -- and even India in the third quarter. This has been a recurring theme: FreeFire has maintained this leading position for the past nine consecutive quarters in Southeast Asia and Latin America and four consecutive quarters in India.

Shopee has seen similar dominance not only in Southeast Asia but also around the world. Shopee was the top-ranked app in the Google Play Store globally in the shopping category based on time spent in the app in Q3. Specifically in Southeast Asia, Shopee has become a mainstay. During a popular sale for Shopee on November 11 -- called Single's Day -- the company sold over 11 million items in the first five minutes of the sale. Website visits also spiked 5.5 times the normal daily amount in the first two hours.

Shopee has solidified itself as the primary e-commerce provider in the region, and SeaMoney is hoping to do that in the payments space. While not as mature as Shopee or Garena, SeaMoney has been growing rapidly in hopes to become the main mobile wallet services provider in Southeast Asia. The company reported nearly 40 million quarterly paying users in Q3. This resulted in a total payment volume of $4.6 billion, which grew 111% year over year. 

SeaMoney has continued adding services to gain adoption and recognition. Recently, the company added a buy now, pay later feature called ShopeePayLater, and it has also added loan services for both Shopee sellers and consumers. 

Rapid international expansion

Many companies would be satisfied with this level of success in one region, but Sea Limited has plans to become a global brand with a world-leading e-commerce brand. In addition to its dominant offering in Latin America and Southeast Asia, Shopee is making a push into Europe. In Q3, the company announced that Shopee will be offered in Spain, Poland, and France. Additionally, the company has also made a push into India where FreeFire has already gained popularity.

International expansion typically results in significant language barriers within various geographical locations. But Sea Limited has been able to integrate a coherent website for all languages used in the regions it currently operates in. Some of those languages include Southeast Asian dialects, French, Spanish, and Brazilian Portuguese.

With massive growth often comes intense spending, and that is the case for Sea. The company is nowhere near profitability, and it lost $571 million in Q3. Sea's net loss deepened by 34% year over year compared to 122% top-line growth over the same period. If the company continues to see this explosive growth because of its success internationally and this trend continues, it could start turning around those net losses. Although Sea likely won't be profitable for a few years, until it can begin to scale back its expenses while still capitalizing on growing revenues.

Appealing valuation

The company is trading at 52-week low valuations. The mix between stellar growth in 2021 and shares dropping 38% off their all-time highs resulted in a 14 price-to-sales ratio. This is the lowest it has been over the past year, leaving investors a nice opportunity to buy shares while they are cheap. 

While Sea Limited probably won't provide 100 times returns, I do believe Sea could crush the market and potentially become a $1 trillion company in a decade. The company's relentless effort to provide the best service across the world in all aspects of its business has paid off, and it does not look like it will stop anytime soon. If the company can continue making progress with SeaMoney as Shopee becomes a global e-commerce power, I think that Sea will be an amazing investment not only in 2022 but also for beyond.

Jamie Louko owns Sea Limited. The Motley Fool owns and recommends Sea Limited. The Motley Fool has a disclosure policy.

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