Sea Ltd. stock jumped Tuesday after the Southeast Asia e-commerce market leader reported its strongest sales growth since early 2022, topping Wall Street forecasts.
The parent company of the Shopee e-commerce platform reported a 38% increase in revenue to $5.26 billion, better than analyst estimates of $4.96 billion. E-commerce sales increased 34% to $3.8 billion.
Singapore-based Sea's Shopee is the largest e-commerce platform in Southeast Asia and has also expanded to parts of Latin America. Other holdings for the company include digital-payments provider SeaMoney and Garena, a global online games developer.
Sales growth for Sea accelerated from the 30% rate in Q1 and was the fastest pace since the first quarter of 2022. Sea's Digital financial services revenue increased 70% to $883 million and digital entertainment revenue increased 28% to $559 million.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased 85% to $829.2 million for Sea, compared to estimates of $783 million. Sea's reported net income of $414 million marked a 418% jump, though the total was slightly short of previous estimates. Earnings of 65 cents per share for the June-ended quarter marked a 364% increase from a year earlier.
"Given the high potential of our markets and the stage we are at in our business now, we will continue to prioritize growth, which will pave the way for us to maximize our long-term profitability,' Sea Chief Executive Forrest Li said in a news release. "At the same time, our company has reached a stage where we can pursue growth opportunities while improving profitability."
On the stock market today, U.S.-listed Sea stock jumped 19% to close at 174.12. Sea retook its 21-day and 50-day moving averages. Shares also broke out above a 172.65 consolidation buy point, according to MarketSurge.
Sea Stock Riding 168% Rally
With Tuesday's gains, Sea stock is ahead 64% this year and up 168.5% compared to 12 months ago.
Accelerating sales growth and improved e-commerce profitability have allowed Sea to rally back after struggles in 2022 and 2023. Strong e-commerce growth has helped bolster investor confidence that Shopee can fend off competitors such as TikTok and PDD Holdings' Temu.
Sea shares had pulled back in the weeks ahead of Tuesday's report, including a 7% slide on July 21 that followed news the company is raising fees for sellers in Indonesia.
JPMorgan analyst Ranjan Sharma reiterated an overweight rating for Sea in a client note previewing the company's Q2 results last month. He said he expected strong growth from Sea's e-commerce business.
"Shopee is likely outpacing growth in the e-commerce industry and gaining market share," Sharma wrote on July 22. "Growing market leadership is driving better pricing power and Shopee (along with other platforms) is increasing monetization. Shopee has raised seller commission fees across ASEAN (Association of Southeast Asian Nations) and Brazil, and has also introduced new transaction fees in Indonesia."
Meanwhile, Sea stock has a best-possible IBD Composite Rating of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
Sea's IBD Relative Strength Rating is 92 out of 99. The RS Rating means the stock has outperformed 93% of all stocks in IBD's database over the past year.
