Sea Limited’s SE shares have appreciated 10.2% over the past six months, outperforming the Zacks Computer & Technology sector’s decline of 17.2%.

SE has outperformed the Zacks Internet Software industry and its peers, including CI&T CINT, Digital Turbine APPS and Arlo Technologies ARLO.

Over the same time frame, shares of CI&T, Digital Turbine and Arlo Technologies have lost 36.6%, 25.7% and 21.7%, respectively. Meanwhile, the industry has declined 9.9%.

The rise in SE shares can be attributed to the company’s strong performance across all core business segments, including e-commerce, digital financial services and digital entertainment. Each division has meaningfully contributed to the company’s upward momentum, accounting for 74%, 15% and 11% of consolidated revenues, respectively.

At the same time, Sea Limited remains well-positioned for continued success, with management expressing strong confidence in sustaining profitable growth through 2025. This outlook is supported by solid momentum in its e-commerce segment with solid GMV expansion and expected double-digit gains in users and bookings within its digital entertainment segment.

SE Accelerates Across Core Business Segments

Shopee, Sea Limited's e-commerce platform, has demonstrated substantial growth, with a 41% year-over-year revenue increase in the fourth quarter of 2024 to $3.7 billion. This jump is attributed to enhanced monetization strategies, including increased advertising revenues and improved commission rates. Shopee's focus on expanding its market presence and optimizing operational efficiency has solidified its leadership position in key markets.

SeaMoney, the company's digital financial services arm, has emerged as a significant growth driver, with revenues increasing 55.2% year over year to $733.3 million. The expansion of its loan book by more than 60% in the fourth quarter underscores Sea Limited's commitment to capturing the growing demand for financial services in Southeast Asia. This strategic focus positions SeaMoney to outpace traditional financial institutions in the region.

Garena, SE's digital entertainment division, has experienced a recovery, with annual bookings growing 34% year over year, particularly with its flagship game, Free Fire. The game sustained booking growth since its low in the second quarter of 2023, contributing to the overall recovery of the segment. This rebound reflects Sea Limited's ability to adapt to market dynamics and maintain user engagement in a competitive gaming landscape.

Free Fire’s Resurgence Drives Success for Sea Limited

Free Fire’s performance in 2024 underscores its strategic resurgence and enduring appeal in the global mobile gaming market. Regaining the top position worldwide in both daily active users and downloads, as reported by Sensor Tower, reflects the game's exceptional user engagement and retention. Notably, its rapid user growth in emerging markets, such as a 90% year-over-year surge in Nigeria, signals Garena’s successful regional expansion strategy and adaptability across diverse demographics and market conditions.

Now in its eighth year, Free Fire continues to demonstrate exceptional engagement and retention, securing its status as an evergreen franchise. For 2025, Garena anticipates sustained double-digit year-over-year growth in both user base and bookings. The year also began with a high-impact NARUTO SHIPPUDEN collaboration, which has already generated an overwhelmingly positive response, setting a strong tone for continued momentum.

SE Faces Growing Threats in E-Commerce Space

The competitive landscape in e-commerce remains challenging, as rivals are raising their take rates, closing the gap with Shopee’s pricing. Sea Limited’s management has recognized this trend and is actively reviewing its structure to stay competitive while supporting sellers. However, this fast-changing market could put pressure on Shopee’s market share and overall profitability.

Operating across multiple countries in Southeast Asia, SE faces diverse regulatory environments. Navigating these varying regulations adds complexity and potential costs to its operations. Additionally, the company's expansion into new markets exposes it to economic and political uncertainties that could impact its performance.

Conclusion

Sea Limited’s strong presence across e-commerce, digital finance and gaming underscores its long-term growth potential. However, rising competitive pressures and complex regulatory landscapes present short-term headwinds. Investors may consider holding on to the stock for now, and closely monitoring the company’s execution and market developments.

The company currently carries Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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