It wasn't too long ago that Southeast Asia-based Sea Limited (SE -0.23%) was essentially left for dead by investors. For example, at the end of 2022, overall revenue growth was just 7%, and the business had burned through billions of dollars in cash in the prior 12-month period. Although the company's e-commerce business was doing quite well, the long-established digital entertainment business was hemorrhaging active users and saw bookings plunge by 18%. For the full year of 2022, the company posted a net loss of $1.7 billion.
However, the company did a phenomenal job of turning things around. In 2024, all three business segments grew, and overall revenue increased by 28%. Sea posted a $448 million profit for the full year, and the business was firing on all cylinders. Investors were handsomely rewarded, and the stock gained 162% last year.
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Sea just reported its second-quarter earnings, and the results sent Sea spiking even higher. With shares already up another 65% in 2025, is it too late to add shares of this excellent business to your portfolio?
Sea's second quarter was a strong one
Sea's Q2 results were much better than expected, and a quick rundown of the key numbers shows just how well this business is doing.
First, all three main business segments did well:
- The Shopee e-commerce business produced 34% year-over-year revenue growth.
- The Monee financial service business saw loan principal balances rise by 94% compared with a year ago. Not only that, but the non-performing loan ratio of just 1% is remarkably low and has improved in recent quarters.
- The Garena digital entertainment (gaming) platform grew bookings by 23% year over year, and management is guiding for 30% full-year growth in bookings.
- Overall, Sea's revenue increased by 38% compared with last year's Q2.
Not only did all three businesses grow, but profitability is leaps and bounds ahead of where it was a year ago. Gross profit increased by 50% year over year, and net income surged from $79.9 million a year ago to $414.2 million. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) grew by 85%, including rapid growth from all three segments, and Sea now has $10.6 billion in cash on its balance sheet.
Is Sea's stock too expensive?
To be sure, Sea Limited is not a cheap stock. At the current share price, it trades for about 45 times forward earnings expectations. However, with revenue growth of nearly 40% and rapidly expanding margins, there's a solid case to be made that the valuation is completely justified.
On the e-commerce side, as the dominant platform in Southeast Asia, Shopee has a ton of potential to deepen relationships with customers (think about how your relationship with Amazon (AMZN 2.93%) has evolved over the past 15 years). Plus, the Monee fintech platform is expanding into several different verticals, such as buy-now-pay-later (BNPL) lending, and its ecosystem could be in the very early stages of growth.
Sea is a far more efficient company than it was a few years ago and has done a great job of growing at a rapid pace without burning through capital. If the company can continue to keep its momentum going, there could still be plenty of upside potential in the years to come.
