Skip to content

Unprecedented Share Surge by 195% in 2024, Potentially Doubling Once More in 2025

Traditional income expansion has propelled this stock to new heights in 2024, with ample room for more increases potentially still reserved.

An individual exhibiting joy, perched on a couch while utilizing a laptop, over-the-moon about a...
An individual exhibiting joy, perched on a couch while utilizing a laptop, over-the-moon about a successful online transaction.

Unprecedented Share Surge by 195% in 2024, Potentially Doubling Once More in 2025

Sea Group (SE -1.84%) is situated in Singapore and caters to the Southeast Asian market through its operations in three main sectors: digital commerce, digital entertainment (gaming), and digital financial services.

The company's shares have skyrocketed by an astounding 195% in 2024, which can be attributed to improving economic conditions and Sea Group's escalating revenue growth. Despite this significant increase, the shares are still 68% below their all-time high, which was achieved during the tech boom in 2021. This indicates that the recovery may be in its initial stages.

Here's why Sea Group's shares might double (or even exceed that) in 2025.

A formidable trio in the digital market

Digital commerce is Sea Group's primary revenue generator with its Shopee platform taking the lead. Shopee, a hybrid consumer-to-consumer and business-to-consumer platform, handled over 2.8 billion orders during the third quarter of 2024 (Sept. 30 end).

Sea Group is working to enhance Shopee's logistics network to save costs and improve customer satisfaction. This strategy is proving successful as demonstrated by the fact that half of all Asian orders were delivered within two days during Q3, with delivery costs decreasing simultaneously. Rapid delivery has been proven to encourage repeat customers, which will be beneficial for Shopee in the long run, as noted by e-commerce titan Amazon.

Shopee also boasts strong synergies with SeaMoney, a leading entity in Sea Group's digital financial services division. SeaMoney offers consumers interest-free installment plans on Shopee purchases and extends loans to platform vendors for growth. By Q3, SeaMoney had an outstanding loan balance of $4.6 billion, representing a staggering 73% year-over-year increase. The platform also welcomed 4 million new borrowers during the quarter, increasing its total active users to 24 million.

The final segment under Sea Group's umbrella is digital entertainment. Garena, a mobile game development studio, is responsible for this segment and is home to Free Fire, the most downloaded mobile game globally during Q3, and which frequently averages more than 100 million daily active users. During Q3, Sea Group's digital entertainment segment served a total of 628.5 million users, marking a 15% increase compared to the previous year.

Unfortunately, the gaming segment has remained stagnant since the relaxation of pandemic-era social restrictions came into effect, as users now dedicate less time online. The segment's active user count peaked at 729 million in 2021 and has failed to generate any growth since then. Monetization has also struggled, as the number of paying users has decreased by 46% from its pandemic-era high.

However, there is a silver lining, as these metrics have remained relatively stable over the past year, despite failing to surpass the 2021 figures. Investors will be optimistic about a potential recovery.

Rapidly growing revenue

Sea Group posted a revenue of $4.3 billion during Q3 2024, marking a 30.8% increase yoy. This was the company's fastest growth rate in 2.5 years and also represented the third consecutive quarter of continuous acceleration.

The vast majority of Q3's revenue came from the digital commerce segment, with revenue soaring 42.6% yoy to reach $3.2 billion. The digital financial services segment also demonstrated resilience, with revenue increasing 38% to $615.7 million. On the other hand, the digital entertainment segment lagged behind with a 16% revenue decrease, contributing $497.8 million to the total revenue.

Sea Group's revenue growth was not only impressive but was achieved with only a modest increase in operational expenses, which climbed only 5.7% yoy. Furthermore, the company's marketing expenses decreased by 4.3%, indicating strong organic demand for the company's services rather than aggressive spending.

The substantial revenue growth coupled with minimal increases in operational expenses allowed companies to generate higher profitability. Consequently, Sea Group reported a net income of $153.3 million for Q3 2024, marking a positive 1.2% swing from the $143.9 million net loss in the same quarter a year ago.

Sea Group is intent on maintaining a balance between revenue growth and profitability to build a more sustainable company structure, which stands in contrast to its growth-at-all-costs strategy adopted in 2020 and 2021.

Sea Group's shares might double again in 2025

As mentioned earlier, Sea Group's shares have dropped 68% from their all-time high reached in 2021. The company's price-to-sales (P/S) ratio surged above 30 back then, which was undeniably expensive. However, the subsequent decline in share prices and consistent revenue growth have pushed the P/S ratio down to 4.4 as of now, representing a 53% discount in comparison to the company's average P/S ratio of 9.5 since its initial public offering in 2017.

For Sea Group's shares to trade in line with their average P/S ratio of 9.5, they would need to at least double from their current levels. As investors tend to pay higher valuations for rapidly growing companies, a continued acceleration in revenue growth could propel the company toward its average P/S ratio by 2025.

This piece of info is quite fascinating: Sea boasts an immense $9.9 billion in liquid assets and minimal debt recorded on their financial report. This golden situation provides them with remarkable financial freedom, allowing for significant increases in investment areas such as advertising and innovation research, potentially fueling a growth surge in their revenue. Since Sea has demonstrated profitability for a couple of years now, they can afford to step up their expenditure without worrying about exhausting their cash reserves.

As a consequence, there's a solid basis for this stock to double its value once more in the upcoming year, making it a tantalizing buying opportunity at the moment.

Investors may be attracted to Sea Group's shares due to their potential for doubling or even exceeding their current value in 2025. This prediction is based on the company's impressive revenue growth, with digital commerce and digital financial services sectors showing significant gains, and the relatively low price-to-sales ratio compared to its historical average.

Moreover, Sea Group's financial strength, as illustrated by its $9.9 billion in liquid assets and minimal debt, opens up opportunities for increased investment in advertising and innovation research. This could potentially fuel further growth in Sea Group's revenue, making the current share price a potentially lucrative buying opportunity for those interested in finance and investing.

Read also:

    Comments

    Latest