Amid volatility and competition, conglomerates in the e-commerce business have delivered considerable returns to investors over the years. Amazon, which was a pioneer in the e-commerce and cloud computing industries, is arguably the best example of this growth.
On the other side of the world, Sea Limited (NYSE: SE) has emerged as the same type of company in Southeast Asia. After some huge missteps following the pandemic, management seems to have righted the ship -- and with the stock trading down 56% from its all-time high, it could have plenty of room to run in a recovery.
Image source: Getty Images.
Understanding Sea Limited
Singapore-based Sea Limited leads Southeast Asia in e-commerce and fintech with its Shopee e-commerce business and Monee fintech enterprise. Additionally, its original business, gaming company Garena, is a leader in mobile gaming: Its lead title, Free Fire, was the world's most downloaded mobile game in three of the last five years.
Nonetheless, when the COVID-19 pandemic began to recede as a threat a few years ago, Garena's profits slid as formerly locked-down gamers started spending less time on their smartphones. Furthermore, India, now the world's most populous nation, put a ban on Free Fire, which contributed to the gaming unit's dramatic revenue decline.
On the e-commerce side, Shopee made attempts to expand its footprint and compete in Europe and Latin America. The results were disastrous, and within a relatively short period, it withdrew partially or entirely from all markets outside Southeast Asia except Brazil.
However, as those businesses languished, Sea's steady growth driver was Monee, which has prospered by serving unbanked or underbanked customers. Network effects with Shopee and Garena have also made its ecosystem more compelling.
Now, business conditions have improved. Garena's revenue is on the rise again amid a revival in Free Fire gaming, and its eventual return to India could boost revenue further. Also, Shopee has followed the leads of e-commerce majors like Amazon and MercadoLibre, investing in logistics in its home markets. That should boost its competitive advantage over peers such as TikTok.
The financial recovery
Not surprisingly, such improvements have paid off for Sea Limited. In the first quarter of 2025, revenue rose 30% year over year to $4.8 billion. That wasn't an anomaly. Revenue grew 29% in 2024.
Monee's revenue grew by a staggering 58% in the quarter. Shopee's revenue surged 28% amid record gross merchandise volume. And Garena, which had declined for several quarters, grew revenue by 8%, indicating it has finally climbed out of its down cycle.
In comparison, costs and expenses for Sea Limited grew by 20% during that time. That allowed it to recover from a modest net loss in the year-ago quarter. In Q1 2025, Sea Limited earned $411 million in net income.
Still, challenges remain. Monee's loan volume rose by more than 75% yearly. While this should bode well for the fintech segment, it will have to keep the proportion of non-performing loans in check. Moreover, analysts forecast 25% annual revenue growth in 2025, which would be a slowdown from year-ago levels. Such decelerations often hurt stock price growth.
Even so, though it's still down by 56% from the all-time high it hit in 2021, Sea Limited stock has risen by more than 120% over the past 12 months. Additionally, some investors may be inclined to overlook its trailing P/E ratio of 115, considering its forward P/E ratio stands at a less lofty 41.
Buy Sea Limited stock
Thanks to the strengthening performance of all three of its segments, Sea Limited stock is probably on track for further growth.
Admittedly, the ban on Free Fire in India and Shopee's misplaced focus on expansion hurt the stock earlier in the decade. Fortunately, Free Fire revenue has recovered and the game could return to India soon. Also, Shopee has wisely course-corrected, investing in enhancing its competitive advantages at home and putting less of a focus on new markets where it would struggle to develop a competitive edge.
Consequently, all three of its segments are now in growth mode, and Sea Limited's moderate forward P/E ratio likely presents investors with a buying opportunity. Over the long term, such conditions could take the stock back to its record highs and beyond.
Should you invest $1,000 in Sea Limited right now?
Before you buy stock in Sea Limited, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Sea Limited wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider whenNetflixmade this list on December 17, 2004... if you invested $1,000 at the time of our recommendation,you’d have $640,662!* Or when Nvidiamade this list on April 15, 2005... if you invested $1,000 at the time of our recommendation,you’d have $814,127!*
Now, it’s worth notingStock Advisor’s total average return is963% — a market-crushing outperformance compared to168%for the S&P 500. Don’t miss out on the latest top 10 list, available when you joinStock Advisor.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Will Healy has positions in MercadoLibre and Sea Limited. The Motley Fool has positions in and recommends Amazon, MercadoLibre, and Sea Limited. The Motley Fool has a disclosure policy.
