Sea Limited [NYSE: SE] was one of the biggest gainers in Wednesday trading, pushing up by about 24.06% at the close of business. This follows a strong earnings report that beat analysts’ expectations. The company reported first-quarter earnings of $578.8 million, much higher than analyst estimates of $434.9 million. The company’s number of users also doubled in the last quarter, to hit 271 .6 million. At this point, the company’s core revenue driver is gaming. One of the games they offer on the Garena platform, Free Fire Mobile, continues to grow strongly and now has more than 450 million users, making it the most downloaded mobile game internationally.
Looking at the charts, Sea Limited seems to be correcting, after the massive surge in value yesterday. On the day charts, Sea Limited is now trading below the 200-day MA, which is now acting as an area of key resistance. This could be an indicator that traders are taking profits after Wednesday’s price action that saw it gain by over 20%. However, from a look at the monthly charts, the overall momentum for this stock is upwards. It is in clear uptrend with the 50-day moving average offering key support at $24.30.
The fundamentals too paint a bullish picture for this stock. For starters, its growing user numbers create the basis for sustained growth in revenues going into the future. This means that earnings per share for investors are also likely to grow over time, and that’s bullish.
Other factors that add to this company’s bullish sentiment include its ability to repay all its short-term debt obligations with ease. The company has a current ratio of 1.44 which means that, its current assets are fully capable of meeting its current liabilities within the year. This is important because it protects the company from the risk of bankruptcy, due to sudden market changes that may impact negatively on its revenues in the short-term.
Another fundamental factor that gives weight to this stock is its quarterly growth in revenues. The company’s quarter revenue growth (yoy) stands at 127.30%. That’s a good indicator that the market is receptive to the products that this company is offering. From an investor standpoint, this could signal to the long-term profitability of the company. That’s because, as revenues grow, so will the company’s profits, and earnings per share that investors can expect. It’s a good signal that in due time, the company will turn its negative profit margins of -116.24% into a positive, and by extension, turn its return on equity from -815.56% positive as well.
With its positive growth numbers, it is not surprising that analysts rank it a strong buy. Analyst consensus on this stock is 1.7 which is a strong buy. As it continues growing its market share in South East Asia, one of the fastest growing in the world, this company’s revenues could emerge stronger. Where it heads into the future, will be interesting for investors to watch.