What happened

Shares of Sea Limited (SE -0.60%) charged sharply higher this week, gaining as much as 23.2% compared to last Friday's closing price. As of 12:36 p.m. ET Thursday, the stock was still up 21%.

The catalyst that sent the e-commerce and digital entertainment specialist higher was its quarterly financial report, which was not only much better than expected, but it saw the company swing to an unexpected profit.

So what

For the fourth quarter, Sea Limited generated revenue of $3.5 billion, up 7% year over year. The headline, however, was the company's bottom line, which swung to a profit of $423 million, compared to a loss of $616 million in the prior-year quarter. This resulted in earnings per share (EPS) of $1.01. 

The results sailed well above Wall Street's expectations, as analysts' consensus estimates were calling for revenue of $3.1 billion and a loss per share of $0.64. 

Sea Limited continued to produce meaningful improvement across its trio of digital businesses. E-commerce revenue of $2.1 billion was up 32% year over year. Digital entertainment revenue of $949 million improved 6% sequentially but was still down 32% year over year, the result of tough comps. Most impressive was the performance of its fintech segment, as its digital financial services revenue of $380 million surged 93% year over year.

Now what

Beyond the robust financial results, a raft of positive investor sentiment helped lift Sea Limited stock. A number of high-profile Wall Street analysts jumped on the bandwagon, resulting in numerous price target increases.

The most bullish call came from Bank of America, which raised the firm's price target to $92, up from its previous level of $68. This suggests additional upside for investors of 16% -- even after the stock's 20% gains this week.

The firm noted that while the company didn't provide guidance for the coming year, management's commentary remained "optimistic." As a result of the surprise profit, the firm increased its EPS estimates "meaningfully," as it expects Sea Limited to be profitable going forward.

Given the company's remarkable turnaround, it isn't surprising the stock now trades at a slight premium, selling for 2.8 times next year's sales.

Still, for investors with a stomach for a little volatility, Sea Limited is a buy.