Stocks to watch: Sea Limited, held by Cathie Wood’s ARK funds, near point of purchase
Mobile gaming and e-commerce platform Limited sea (SE), featured in today’s IBD 50 Stocks To Watch, is near a buy point as revenues explode.
Singapore-based Sea claims to have both the largest digital entertainment platform and the largest e-commerce operation in the Southeast Asia region, including Indonesia, Taiwan, Vietnam, Thailand, the Philippines, Malaysia and Singapore. Its market extends to Latin America.
Sea organized an initial public offering in October 2017 that raised $ 884 million, or $ 238 million more than initially expected. The IPO priced at 15, above its estimated range. The marine stock has increased by over 400% in the past 12 months.
Tencent Holdings (TCEHY), one of China’s largest internet companies, is a major shareholder. A key competitor is the Chinese e-commerce giant Alibaba Group (BABA).
Cathie Wood also loves the sea
Sea stock is held in several ARK Invest funds managed by renowned manager Cathie Wood: ARK Innovation ETF (ARKK), ARK Next Generation Internet (ARKW) and ARK Fintech Innovation (ARKF).
(David Ryan, a protÃ©gÃ© of IBD founder William O’Neil, discussed SE stock on IBD Live on Tuesday. You can find video from that day in the IBD Live archives.)
IBD Stock Checkup gives Sea a composite rating of 77, which gives investors a quick way to assess the main growth traits of a stock. This places it in the top quartile of the 66-stock internet content group, which includes Facebook (FB) and Google parent Alphabet (GOOGLE).
A rating of 14 earnings per share, which is part of the overall composite score, is low, which helps explain the unimpressive composite rating. Sea has yet to make an annual profit. But it has a strong revenue track record, with a five-year compound sales growth rate of 85%. Analysts expect sales to jump 90% this year and 49% the next.
In May, Sea reported first-quarter GAAP revenue that grew 147% year-over-year, driven by strong performance across all of its businesses. Digital entertainment bookings at its Garena unit increased 117% to $ 1.1 billion. Quarterly active users rose 61% to 648.8 million, while paid users jumped 124% to 79.8 million.
Sea’s Shopee e-commerce unit recorded 1.1 billion gross orders, up 153% year-over-year. GAAP revenues jumped 250% to $ 922.3 million.
Stocks to watch: Sea Eyes point of purchase
The technical scores of the title are better. Its relative strength rating of 92 places Sea in the top 8% of all stocks. Its relative strength line, which compares a stock’s performance to that of the S&P 500, is near all-time highs. It is a bullish sign.
On a weekly chart, the stock is around 3% below a buy point of 285.10 of indefinite consolidation, according to MarketSmith’s chart analysis. It passed the entrance last week and this week, but didn’t close above.
But on a daily chart, Sea offers an earlier entry of 278.10 from a six week cup basis. It passed the point of purchase last week and is now close to entry.
One caveat: the current basis (daily and weekly) is the fourth step, which increases the risk of failure. Stocks tend to take their biggest lead over earlier stage bases.
Follow Nancy Gondo on Twitter at @IBD_NGondo
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