We came across a bullish thesis on Sea Limited (SE) on Multibagger Nuggets’ Substack by Kris. In this article we will summarize the bulls’ thesis on SE. SE Technologies, Inc. share was trading at $81.18 as of Sept 13th.
Sea, despite recent challenges, remains an intriguing investment opportunity. The company has demonstrated a remarkable turnaround from substantial GAAP losses to notable profitability, achieving nearly $500 million in profits within two quarters. Recent quarters have seen renewed losses, but these are strategically driven and are on a declining trend. Sea’s free cash flow (FCF) remains robust, reflecting the company’s ability to generate cash even amid profitability fluctuations.
The company’s revenue growth is impressive at 22.8%, indicating a strong market presence and resilience. However, the durability of this growth has been somewhat affected by increasing competition in its key markets. Sea’s diverse portfolio, which includes Shopee and SeaMoney, supports ongoing revenue strength. Shopee, in particular, continues to dominate Southeast Asia with a 48% market share, showcasing its competitive edge despite the broader market challenges.
Sea’s R&D efforts have been substantial, with the company investing 8.15% of its revenue in research and development. This investment has yielded high R&D efficiency, reflecting Sea’s commitment to innovation and market leadership. The company’s significant innovation pace has played a crucial role in expanding its market share, particularly in e-commerce and digital financial services.
Financially, Sea maintains a positive free cash flow, even when recent GAAP results have been less favorable. The company is in a strong liquidity position with a net cash status. Valuation metrics present a mixed picture: the stock, currently trading around $68.76, has a price-to-earnings (P/E) ratio of 26.4, which is reasonable given its growth potential. The price-to-free cash flow (P/FCF) ratio is 41, indicating a premium. Forward-looking metrics show a 2024 PEG ratio of 0.75 and a 2025 PEG ratio of 0.21, suggesting that the stock is attractively priced relative to its expected earnings growth.
Overall, Sea’s strong revenue growth, effective management of financials, and substantial market potential position it as a compelling investment. While recent valuation increases reflect market adjustments, the company’s long-term prospects, driven by its significant market opportunities and innovation capabilities, support its appeal as an investment.
Sea Limited is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 63 hedge fund portfolios held SE at the end of the second quarter which was 61 in the previous quarter. While we acknowledge the risk and potential of SE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.