We take a look at global internet giant Sea Limited and whether investing in their stock will benefit you. Although the company has a track record for consistency and longevity, is it enough to maintain growth in the long term?
|Electronic Gaming & Multimedia|
|1 Fusionopolis Place, Singapore, Singapore|
Over the years, Sea Limited has made its mark and steadily continues to do so in the world of digital consumers. Within the past few years alone, they have consistently proven their strengths through their services which have seen billions in gross revenue YoY.
Now with an expansion in the works, Sea Limited is set to conquer even more territories.
While they have seen lots of steady progress, especially in recent years, there have also been numerous inconsistencies that can have a huge impact on long-term profit.
We believe this is an investment that can lead to great returns, but can you invest in this company confidently with minimum loss? Let’s take a deeper look.
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About Sea Limited
Sea Limited is a global consumer internet company based in Singapore. It was founded in 2009 by Forrest Li, who is also the company’s chief executive officer. The company operates three subsidiaries within the e-commerce, digital payment, and gaming industries.
Since 2018 SE revenue YoY has been on a constant incline with increases as high as 163%. Though each subsidiary has greatly increased gross revenue, it’s their gaming subsidiary Garena that has broken records during the pandemic while bringing in billions in revenue alone.
Their popular game ‘Free Fire’ was downloaded 1 billion times on Google Play in 2021, making it the first mobile game in its niche to break such a monumental record.
The battle royale game even made its mark in the Guinness World Records in August 2021 during their notable fourth-anniversary celebration in Las Vegas.
Although their gaming subsidiary continues to take the lead, their e-commerce and digital payment subsidiaries aren’t far behind. Sea Money, their financial and digital payments service provider, hit a $4.6 billion total payment volume with a 111% YoY increase in their Q3 for 2021.
They also saw in Q3 quarterly paying users for their mobile wallet skyrocket to 39.9 million, quite a jump from just 32.7 million paying users in 2021 Q2.
Lastly, their e-commerce sector Shoppee also saw massive growth in 2021. In southeast Asia, Shopee is the only e-commerce brand that holds the title of the most visited e-commerce website in the territories.
In 2021 alone, SE accomplished the expansion of Shopee. They branched into France, Poland, and Spain all within the span of one month.
All three companies are forecast to continue on an upward trend in the near and distant future. Should trends remain consistent, Sea Limited is predicted to hit a colossal $55.5 billion in revenue by 2030.
There are many reasons why investing in SE is beneficial long-term and their impressive market growth within the past few years is one of them.
Garena, the companies’ gaming subsidiary, broke records after their ‘Free Fire’ game became the most downloaded game of 2020. This led to a 64% increase in revenue in their gaming market which brought in about $1.2 billion for the Southeast Asian company.
- Currently working towards expanding to other parts of Asia and the South American market as forecasts predict their e-commerce brand Shoppee will reach $175b by 2025.
- SE continues to blow past YoY and other predictions despite decreases in EBITDAs and profitability.
- Since 2019 Shopee has seen continuous growth. Currently, its market value stands at an impressive $173b. In August 2021 Shoppee reported a massive growth of 160% YoY. Specialists predict the e-commerce brand will long pass Alibaba by the end of 2022.
- For nine continuous quarters, Garen’s ‘Free Fire’ has maintained the lead as the top-grossing mobile gaming app throughout India, Southeast Asia, and Latin America.
- On Google Play ‘Free Fire’ came in as the second top-grossing mobile gaming app for three successive quarters.
On the flip side of the coin, there are some things you should consider that could impact you negatively when investing with SE. The first is the risk of loss due to a consistent decline in their GMV.
Another potential risk is the number of shares needed for their global expansion.
While expanding into other territories is a great move in the right direction it can also mean a loss in percentage of shares for you as an investor.
Here are some other things to keep in mind:
- Their balance sheet consists of debt history which increases the amount of risk you as an investor will take. This debt increased from $1.39b to $1.84b within just a year.
- Despite great success, there has been a consistent decrease in their GMV, or gross merchandise value, since 2020. Q3 2021 is currently at $9.9b which is down from $13.3 Q3 in 2020.
- SE is ending 2021 with even more total operating expenses and cost of revenue losses than they did in 2020.
- With Garena being the top-earning of the three companies, if anything should happen where numbers fall it may prove extremely difficult for SE to recover lost profits.
Sea Ltd. Competitors
It’s safe to say Sea Limited is worth the investment. Although there have been drops in their numbers over time, they have proved sustainable throughout each of their services.
Their growth has and continues to skyrocket in areas where it counts the most. For instance, even though they have debt on their recent balance sheet, it’s important to note they have an equal amount of assets and liabilities.
This means they have more than enough cash than they do debt. Within 12 months they have managed to bring their revenue to a total of $4.4b which equates to a 101 percent increase in revenue.
All in all the future looks quite promising in terms of growth for SE in the long term.
Should you invest $1,000 in Sea Ltd. right now?
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I’m Donny. I’m a world traveler, investor, entrepreneur, and online marketing aficionado who has a big appetite to compete and disrupt big markets. I thrive on being able to create things that impact change, difficult challenges, and being able to add value in negative situations.