Prediction: Sea Limited Stock Will Soar Over the Next 5 Years. Here Are 3 Reasons Why

In the universe of e-commerce conglomerates, Sea Limited (NYSE: SE) is easy to bypass.

It's based in Singapore, and its e-commerce and fintech businesses operate primarily in Southeast Asia. While those markets cover more than 600 million people, that is less than higher-profile Asian markets like China and India. Strategic mistakes and unexpected challenges also wiped out the stock's post-pandemic gains.

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Nonetheless, a renewed focus on its competitive advantages has returned Sea Limited to smooth waters. Here's why it is likely to prosper over the next five years.

Sea Limited looking forward

The three reasons why Sea Limited will likely soar is the outlook of its three segments. Fintech enterprise Sea Money has grown rapidly throughout the 2020s. Its presence in Southeast Asian markets and its fast-growing loan book give Sea Money an edge over developed-world fintechs like PayPal.

Its e-commerce segment, Shopee, grew rapidly during the pandemic's height. However, it mistakenly went into markets in Europe and Latin America, where it lacked a competitive advantage. Thankfully, it has course-corrected, leaving most of those markets and investing in logistics to expand its competitive moat in Southeast Asia.

Additionally, gaming segment Garena may finally benefit as digital gaming moves on from the post-pandemic decline. Its popular Free Fire game benefits from having 100 million daily active users as of the third quarter of 2024, a 25% yearly increase. Need for Speed is the most downloaded game in three Asian markets, increasing the odds of Garena's long-term expansion.

Improving results

Such moves have bolstered the company's financials. Garena's revenue was still down in Q3 2024, but with the declines slowing, overall revenue in the first nine months of 2024 rose 26% to nearly $12 billion, a vast improvement from the single-digit revenue growth in the same year-ago period. Investors have taken notice of that advancement, and Sea Limited stock is up significantly.

Despite that increase, it has a forward price-to-earnings ratio of only 34. Assuming it can stay on its current path for the next five years, today's investors may be glad they bought Sea Limited stock at such a valuation.

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Will Healy has positions in Sea Limited. The Motley Fool has positions in and recommends PayPal and Sea Limited. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short March 2025 $85 calls on PayPal. The Motley Fool has a disclosure policy.