Sea Ltd. (SE) presents a compelling bullish case for 2025, thanks to its strong positions in gaming, e-commerce, and fintech across emerging markets, writes Matthew Timpane, editor at Schaeffer’s Investment Research.
The company has seen impressive growth in its gaming business, with Free Fire's revenue expected to grow by over 30% year-over-year in 2024. Shopee, Sea’s e-commerce platform, reached profitability in Q3 2024 with GMV rising 25% year-over-year.
Long-term margin projections have been revised upward, driven by increased advertising monetization, expected to reach 3.6% of GMV by 2033. Shopee also benefits from a more favorable competitive environment, as rivals like TikTok reduce promotional spending, and regulatory shifts such as Temu’s suspension in Vietnam, reduce competition.
Sea’s fintech arm is also thriving, with significant growth in lending, particularly consumer and SME loans, which grew 31% quarter-over-quarter. This diversification ensures a robust and resilient business model, with Sea positioned to benefit from both its expanding digital finance services and its strong foothold in gaming and e-commerce.
Moreover, Sea is also trading at a favorable valuation. The current price-to-sales (P/S) ratio of 4.11 is significantly lower than its 5-year average of 9.66, indicating the stock is undervalued relative to its historical performance. This provides investors with an attractive entry point at a lower-than-average valuation.
From a technical perspective, Sea recently broke out of a large stage one weekly base pattern, transitioning into a stage two uptrend as we head into 2025. Investors should view any pullback to the round $100 and $90 support zone as a buying opportunity. A move above the $125-$130 resistance level could send prices back to the $200 pivot level from 2021, signaling further upside.
On the options front, we are seeing deep in-the-money (ITM) put sellers at the December 2025 and January 2026 130-strike puts, with large traders expecting the share price to be above this level by year-end. Additionally, significant size ITM and out-of-the-money (OTM) calls are targeting a move higher, with sweepers actively targeting the $145 strike.
The stock’s Schaeffer’s Volatility Scorecard (SVS) stands at 71 out of 100, suggesting that Sea has rewarded premium buyers over the past year, and its Schaeffer’s Volatility Index (SVI) of 39% in the 10th percentile signals low volatility expectations. This indicates that options are currently cheap, and larger-than-expected moves are likely.
Overall, Sea’s strong fundamentals, improving margins, technical momentum, and favorable valuation make it an attractive investment with substantial upside potential.
