{"id":33528,"date":"2023-07-10T04:22:03","date_gmt":"2023-07-10T08:22:03","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/sea-stock-this-is-the-time-to-make-a-big-splashy-bet-nysese\/"},"modified":"2023-07-10T04:22:07","modified_gmt":"2023-07-10T08:22:07","slug":"sea-stock-this-is-the-time-to-make-a-big-splashy-bet-nysese","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=33528","title":{"rendered":"Sea Stock: This Is The Time To Make A Big Splashy Bet (NYSE:SE)"},"content":{"rendered":"
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With the S&P 500 hovering around 12-month highs despite macro jitters, a common question investors are asking is: is it too late to get in on the rally? For me, the answer is no, but the key is careful stock picking. I continue to advise investors to go against the grain and buy out-of-favor tech stocks (as in, avoid the latest AI craze).<\/span><\/p>\n

Sea (NYSE:SE<\/span>), in particular, is an international tech giant that has fallen sharply out of favor recently. A one-time market darling, the so-called “Amazon of Southeast Asia” has seen a massive correction since May (despite most other tech stocks rallying sharply since then), giving back all of its year to date gains.<\/p>\n

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Data by YCharts<\/figcaption><\/figure>\n<\/p>\n

In spite of risks, the Sea bull case remains vibrant<\/h2>\n

Pessimism for Sea can be summed up by one main driver: a sharp contraction in activity for Garena, the company’s gaming division. Sea’s video gaming business was a major highlight during the pandemic, when bored teenagers sunk millions into in-game purchases and the company’s ratio of paying users hit all-time highs. Now, not only are active users across the company’s games down, but the propensity to spend for in-game content is also waning.<\/span><\/p>\n

At the same time, the slowdown in gaming is being offset by huge growth in the company’s e-commerce arm, Shoppee. During the pandemic, I was largely bullish on Sea for one simple reason: losses in the fast-growing e-commerce division were effectively being subsidized by big profits in gaming. So now, even though we’re disappointed by the declining paid user trends in gaming, we’re also encouraged by the fact that Sea is no longer heavily dependent on gaming profitability now that e-commerce has scaled to profitability in its own right.<\/p>\n

We also have to recognize that the gaming world is highly seasonal and fad-based. Sea’s Free Fire <\/em>had its moment of glory, but the cast of popular online games is a rotating sphere (League of Legends, <\/em>DOTA, Fortnite, Warcraft, <\/em>and others are constantly jockeying for position with users’ limited time). In other words, soft trends now do not necessarily mean Garena will be in the hole forever.<\/p>\n

When we step back from near-term noise, here are what I believe to be the core components of the bull case for Sea:<\/p>\n