Posted on April 12th, 2021
Sea Ltd. (SE) experienced tremendous growth over the past year, dramatically outperforming the S&P 500 and rising by approximately 529.3% compared to the S&P’s gain of about 26.8% as of April 9, 2021. Hedge funds were actively buying in the fourth quarter of 2020. The internet company bounded upward on the WhaleWisdom Heatmap to a ranking of 9, up from 29.
Sea is a consumer internet company based in Asia that serves customers worldwide through its three core businesses: Garena, Shopee, and SeaMoney. Sea uses an integrated internet platform consisting of e-commerce, digital entertainment content, payment processing, and digital financial services. Sea has undoubtedly benefited from a shift in consumer habits during the coronavirus pandemic that increased online purchases and gaming frequency.
Hedge Funds and Institutions Are Buying
Sea has captured the gaze of hedge fund managers and institutions. Looking at activity by the top hedge funds in the fourth quarter, the aggregate 13F shares held increased to about 80.6 million from 72.5 million, an increase of approximately 11.1%. Of the hedge funds, 44 created new positions, 61 added to existing holdings, 23 exited, and 64 reduced their stakes. Institutions were also buying, as aggregate holdings increased by about 8.7% to approximately 262.2 million from 241.3 million.
Positive Multi-year Estimates
Analysts expect to see revenue rise over the next few years, with year-over-year growth ranging between 30.6% and 79.3% between 2021 and 2023. This growth could amount to revenue of approximately $14.2 billion in 2023, up from $7.9 billion in 2021. Earnings forecasts are also optimistic, rising to $0.51 per share by December 2023, up from a loss of $2.13 for 2021.
Ratings Rise with Favorable Forecasts
CLSA Ltd. analyst Marcus Liu remained bullish on Sea’s long-term prospects and upgraded the equity to Buy with an unchanged price target of $275. Analyst Zhiwei Foo of Macquarie Investment Management also upgraded the stock to an Outperform from Neutral rating. Foo enthusiastically raised Sea’s price target to $280 from $124, noting that the digital finance business is an area of under-valuation.
Sea’s phenomenal year of growth and future potential are encouraging factors for investors. Sea’s business model meets the growing demand of shoppers for online payment and entertainment options. At the same time, opportunities for continued future growth offer an attractive entry point for new investors.