Singapore-based internet services company Sea Ltd. is Tuesday's IBD Stock of the Day. U.S.-listed Sea stock is hovering near 52-week highs following a strong earnings report that highlighted the company's e-commerce strengths amid fierce competition.
Sea is the owner of the Shopee e-commerce network, which is popular in Southeast Asia and Taiwan. Shopee also has expanded to Brazil and other parts of Latin America.
Sea stock has surged more than 180% this year. The huge rally has been helped by Shopee's momentum, as Sea faces challengers for the online shopping in Southeast Asia, including from TikTok, PDD Holdings' Temu and Alibaba's Lazada.
"Shopee has achieved market share gains and profits while some competitors have struggled," JPMorgan analyst Ranjan Sharma wrote in a recent client note. Sharma rates Sea stock a positive overweight.
Sea's Bounceback Year
Investor perception of Sea stands "in contrast," Sharma added, to discussions about the stock following its 2023 second-quarter results.
Sea stock fell by more than 30% in the back half of last year, after it declared with its Q2 results that it needed to ramp up spending in response to increased competition. The company swung to a loss the next quarter.
But Sea's business is bouncing back this year. The company's third-quarter results, reported Nov. 12, underscored that point. The company posted earnings of 24 cents per share, compared with a loss of 26 cents per share a year earlier.
Sales jumped 31% to $4.3 billion. That marked Sea's fastest growth since the first quarter of 2022. E-commerce related revenue grew 41% to $3.4 billion.
Shopee turned a profit, on an adjusted basis, in both Asia and Brazil. Sea Chief Executive Forrest Li said in a news release that the company expects "Shopee to remain profitable going forward."
Li also gave an upbeat forecast for Sea's digital-payments provider SeaMoney and Garena, a global online games developer.
Sea stock jumped 10.5% on the report.
Deutsche Bank analyst Peter Milliken wrote following the report that "Sea's efforts to keep one eye on holding or gaining share and one eye on profitability, continues to succeed."
Deutsche Bank has a neutral hold rating on Sea stock.
Sea Stock At Highest Level Since April 2022
This year's rally continues a choppy run for Sea stock. The company was a Covid-era highflier, gaining more than 800% in a rally that stretched from March 2020 to November 2021.
But a steep sell-off in 2022 wiped out much of those gains. Sea's losses mounted and the market turned against money-losing tech firms. A focus on profitability sparked a comeback in the first half of 2023, before its slump to end the year.
While still well off highs near 372 reached in late 2021, Sea stock is trading at its highest levels since April 2022.
Shares are trading tightly near a 52-week high of 117.85, according to IBD MarketSurge charts. Sea stock rose 2% to close at 115.48 on the stock market today.
While still early in the week, trading action so far show Sea could be working on a three-weeks-tight pattern, which would have a buy point of 117.85.
Sea's relative strength line is near recent highs. The Relative Strength Rating is a strong 97 out of 99.
Meanwhile, Sea stock holds an IBD Composite Rating of 90 out of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one. The best growth stocks typically have a Composite Rating of 90 or better.
