It might not be a household name yet, but Sea Ltd has taken an important market by storm with its e-commerce and payment solutions offerings.
When it comes to the world of e-commerce, the first name on an investors mind is usually Amazon (NASDAQ: AMZN), perhaps closely followed by Alibaba (NYSE: BABA), Shopify (NYSE: SHOP), or — if they really know their stuff — Mercado Libre (NASDAQ: MELI). For me, Alibaba is the closest to Amazon of the lot, helped along by its strong standing in the world’s fastest-growing economy, China. The e-commerce giant, like Amazon, also offers a whole lot more than just e-commerce and its almost 200% stock growth in the past 5 years has been to the benefit of many a portfolio.
However, a relatively unknown, but certainly popular rival has cropped up in the East, which could begin challenging Alibaba for the title of contender: Sea Ltd (NYSE: SE).
What is going on with Sea Ltd stock?
If you had invested in Sea Ltd when it IPO’d back in October 2017, you’d be sitting pretty on a 604% winner as of July 6, compared to Amazon’s 211% rise in the same period and the S&P 500’s (NYSEARCA: VOO) 23% gains. In 2020 alone, Sea has managed to make the most of the rise of e-commerce worldwide, jumping more than 185% YTD, and 34% in June.
Sea’s ‘Shopee’ is the leading e-commerce solution in Southeast Asia by gross merchandise volume, which grew by 74.3% in Q1 to $6.2 billion dollars. The number of buyers and sellers increasing on the platform strengthens the network effect and makes it an obvious choice for shoppers in the region.
Its rise has not just been thanks to its e-commerce division though, but also by becoming a leader in the payment solutions space through its SeaMoney: a direct competitor to the likes of Square (NYSE: SQ) and PayPal (NASDAQ: PYPL). Its closest competitor in this territory — which is home to almost 10% of the world’s population — is Alibaba.
Sea Ltd’s has shown its mettle in 2020 by increasing revenue by 57.9% year-over-year to $914 million in Q1. Even though it is still unprofitable, reporting an adjusted loss of $239 million, Sea Ltd’s divisions are still young, with the SeaMoney and Shopee platforms launching in 2014 and 2015 respectively, and growing substantially in that time.
This should tell you all you need to know about Sea’s stock performance and why it might be time for investors to get in on the action.
Sea competes on another front
In 2017, Alibaba branched into yet another sector through its purchase of gaming company Ejoy, leading it to form its own gaming division. Gaming, and especially esports, is a sector that has been on the rise even before COVID-19, with the video games market expected to be worth $90 billion by the end of 2020. The global esports market alone is expected to be worth $1.8 billion by 2022, with revenue generated mainly through advertisements, while prize pools, ticket sales, merchandise, and betting also bring in cash.
While the industry has generally been dominated by the big names — Take-Two (NYSE: TTWO), Activision Blizzard (NASDAQ: ATVI), and Nvidia (NASDAQ: NVDA) — Sea has managed to carve out its own piece of the pie through its Garena division.
Its “Free Fire” mobile game has helped Sea become the largest digital entertainment company by revenue, increasing 30% year-over-year to $512.4 million. This gaming division has been an all-important revenue generator for the business as a whole, but it is worth noting that the gaming industry can be fickle — consumers want new titles regularly — so its pivot into e-commerce and payment solutions could be crucial to the company’s future growth.
Can Sea Ltd become the next Alibaba?
It is definitely too early to tell, but there are definitely encouraging signs for investors as the business continues to grow. By riding the coattails of 2020’s e-commerce wave, Sea Ltd is certainly beginning to put itself on the map, which will make it an interesting one to watch. In fact, it’s so interesting, that it was our most recent addition to MyWallSt’s® selection of market-beating stocks. To get our full list, sign up for a free trial today and take control of your financial future. Don’t believe us? Just check out our picks’ performance versus the market:
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