We came across a bullish thesis on Sea Limited (SE) on Substack by The Wolf of Harcourt Street. In this article, we will summarize the bulls’ thesis on SE. Sea Limited (SE)’s share was trading at $103.33 as of Nov 14th. SE’s forward P/E was 50.25, according to Yahoo Finance.
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Sea Limited’s Q3 performance showcased substantial growth across its key segments, notably e-commerce and digital financial services, despite some headwinds in digital entertainment. E-commerce GMV reached $25.1 billion, growing 29% year-over-year (YoY) with gross orders up 24%. Shopee solidified its leadership in Asia, seeing a 20% YoY rise in monthly active buyers, while Brazil witnessed nearly 40% growth in active buyers. Shopee increased monetization through higher commission rates, improved ad tools, and market rationalization in Southeast Asia, boosting ad revenue per seller by 25% YoY. This contributed to an implied marketplace take rate of 11.2%, a significant uptick over the previous year.
In digital entertainment, Garena saw its active users grow to 629 million, a 16% increase YoY, with paying users rising 24%. Gross bookings expanded by 24% YoY, marking five consecutive quarters of positive growth driven by popular titles like Free Fire, which has continued to attract over 100 million daily active users globally. Free Fire ranked as the most downloaded mobile game worldwide, and new game launches, such as Need for Speed Mobile in select regions, further bolstered Garena’s engagement metrics.
The digital financial services division, Sea Money, reported a 73% YoY increase in its outstanding loan principal, reaching $4.6 billion, and added four million new borrowers, raising its active user base to 24 million. Leveraging Shopee’s data for risk assessments, Sea Money’s “low-and-grow” strategy has maintained a stable non-performing loan ratio at 1.2%, positioning the platform as a resilient credit provider. Notably, over half of Sea Money’s loans in Indonesia now occur outside the Shopee ecosystem, reflecting expanded use cases in offline purchases, with further regional expansion planned.
Overall, Sea’s revenue grew by 31% YoY to $4.33 billion, driven by surges in GMV and loan business volume, with gross margin remaining steady at 43%. Although digital entertainment’s revenue declined by 16%, impacted by deferred revenue adjustments, the e-commerce and financial services segments offset this with impressive growth. Operating income soared 259% YoY to $202 million, underscoring Sea’s commitment to cost management and return on investment in sales and marketing.
Sea’s results underscore the robust growth potential across its platforms, with a strengthened e-commerce footprint, expanded digital financial services, and a stabilized digital entertainment base. The company’s targeted investment strategy and monetization efforts position it well to navigate market changes and capitalize on rising demand across Southeast Asia and Brazil.
Sea Limited (SE) is 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.