Better Growth Stock: Sea Limited vs. Grab Holdings

Motley Fool2023-09-17

KEY POINTSSea’s e-commerce and gaming businesses face existential challenges.Grab continues to dominate the region’s mobility and delivery markets.One of these tech leaders has a much brighter future....

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Comments

lamboandro
2023-09-19
lamboandro
You cannot grab the sea
FatBelly TGR
2023-09-18
FatBelly TGR
I think both are facing big challenges as uncertainties in the futures doesn't show any promising returns, would go for SEA if I would to chose.
JSQ
2023-09-17
JSQ
I view Grab as a better investment. Grab will definitely cut more incentive from drivers and food riders to narrow down break even or go for profit. Plus buying over Trans-Cab to get more market shares is a great move from Grab.
Ling Wong
2023-09-17
Ling Wong
Share your opinion about this news…
hellodarz888
2023-09-17
hellodarz888
Neither maybe

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Sea owns Shopee, the largest e-commerce marketplace in Southeast Asia and Taiwan, and the video game publisher Garena. Grab, which acquired Uber Technologies' Southeast Asian business in 2018, is the region's largest mobility and delivery services provider. Both companies integrate their own digital payment services -- SeaMoney and GrabPay -- into their mobile apps.But over the past 12 months, Sea's stock price fell 38% while Grab's stock rose 14%. Let's see why the e-commerce and gaming leader underperformed the mobility leader -- and if it will remain the weaker investment for the foreseeable future.The Singapore skyline. Image source: Getty Images.Sea faces an existential crisisSea's revenue surged 101% in 2020 and 128% in 2021. Shopee's sales soared as more people shopped online throughout the pandemic, while Garena's Free Fire became the world's most downloaded battle royale game for mobile devices. But in 2022, its revenue only grew 25% as both businesses faced tough post-pandemic slowdowns.Shopee struggled with fierce competition from Alibaba's Lazada across Southeast Asia, and the macroeconomic headwinds drove it to shut down several of its overseas marketplaces in Latin America, India, and Europe. Garena's Free Fire lost a lot of its paying users as the pandemic passed, and that slowdown was exacerbated by an unexpected ban in India -- its fastest-growing market -- which lasted from February 2022 to August 2023.In 2022, Garena's bookings plunged 39%, and its revenue fell 9%. That slowdown partly offset Shopee's 18% growth in gross merchandise volume (GMV) and 42% revenue growth. Garena's slowdown forced Sea to aggressively cut costs over the past year since it previously subsidized the expansion of its unprofitable Shopee and SeaMoney divisions with Free Fire's profits.Analysts expect Sea's revenue to rise less than 4% in 2023, but they also expect it to turn profitable for the first time since its IPO. Yet reining in its spending could narrow Shopee's moat by reducing its promotions and subsidies while delaying Garena's development of new games to succeed Free Fire. Sea's stock might seem cheap at less than 2 times this year's sales, but its high-growth days are likely over, and both of its core businesses could face existential challenges. Grab's near-term prospects look brighterIn 2021, Grab's first year as a public company, its revenue rose 44% as its GMV grew 29%. In 2022, its revenue and GMV grew another 112% and 24%, respectively.That growth was driven by the robust growth of both its mobility and delivery segments, which grew their GMV by 47% and 15%, respectively, for the full year. Its financial services GMV also rose 27% as it expanded its online lending business.For 2023, Grab expects its revenue to rise 54% to 61%. It's still deeply unprofitable because it relies heavily on loss-leading incentives to gain new businesses and consumers, but it's been reducing those incentives throughout the first half of the year. As a result, it expects to narrow its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss from $793 million in 2022 to just $30 to $40 million in 2023.Just like Uber, economies of scale are finally kicking in at Grab, which consistently dominates the mobility and food delivery markets across Southeast Asia with its 35 million monthly transacting users (MTUs). And unlike Sea, Grab's more disciplined spending doesn't coincide with a significant slowdown in its sales growth. But looking ahead, Grab might face new regulatory headwinds in Singapore, where the Land Transport Authority (LTA) recently launched a review of the ride-hailing industry.At 6 times this year's sales, Grab's stock might seem a bit pricier than Sea's. Yet that price-to-sales ratio seems reasonable relative to its growth rates, and it doesn't face as many competitive challenges as the e-commerce and gaming leader.The better buy: GrabI once considered Sea to be a top long-term play on the economic growth of Southeast Asia, but Shopee and Garena's recent troubles are forcing me to reconsider that thesis.Meanwhile, Grab might face some near-term regulatory challenges, but it's proven that it has plenty of staying power and remains far ahead of its closest mobility and delivery competitors. Its robust revenue growth and narrowing losses also make it a more promising investment than Sea -- which desperately needs to find fresh ways to grow its sales again.","kind":"highlight","is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":221550516986112,"gmtCreate":1695120616194,"gmtModify":1695120620342,"author":{"id":"3575779080875375","authorId":"3575779080875375","name":"lamboandro","avatar":"https://static.tigerbbs.com/fbddf94bce28e9d758a333a569519356","vip":1,"hat":"https://static.tigerbbs.com/b0a2963eb37c60c5d6d4a8dbcd266952","crmLevel":3,"crmLevelSwitch":1,"idStr":"3575779080875375","authorIdStr":"3575779080875375"},"htmlText":"You cannot grab the sea","listText":"You cannot grab the sea","text":"You cannot grab the sea","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/221550516986112","repostId":2367679393,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":221107729850392,"gmtCreate":1695002615723,"gmtModify":1695002620593,"author":{"id":"4108784856214640","authorId":"4108784856214640","name":"FatBelly TGR","avatar":"https://community-static.tradeup.com/news/8a83826a542a663d197f51df3d192187","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"4108784856214640","authorIdStr":"4108784856214640"},"htmlText":"I think both are facing big challenges as uncertainties in the futures doesn't show any promising returns, would go for SEA if I would to chose.","listText":"I think both are facing big challenges as uncertainties in the futures doesn't show any promising returns, would go for SEA if I would to chose.","text":"I think both are facing big challenges as uncertainties in the futures doesn't show any promising returns, would go for SEA if I would to chose.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/221107729850392","repostId":2367679393,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":220827476119664,"gmtCreate":1694934355419,"gmtModify":1694934360103,"author":{"id":"4108560254165730","authorId":"4108560254165730","name":"JSQ","avatar":"https://community-static.tradeup.com/news/2965c45660d747515159c74bab95f512","vip":1,"hat":"https://static.tigerbbs.com/1c1eed764d9c7ff83dc093fbb9a96bc2","crmLevel":4,"crmLevelSwitch":0,"idStr":"4108560254165730","authorIdStr":"4108560254165730"},"htmlText":"I view Grab as a&nbsp;better investment.&nbsp; Grab will definitely cut more incentive from drivers and food riders to narrow down break even or go for profit. Plus buying over Trans-Cab to get more market shares is a great move from Grab.","listText":"I view Grab as a&nbsp;better investment.&nbsp; Grab will definitely cut more incentive from drivers and food riders to narrow down break even or go for profit. Plus buying over Trans-Cab to get more market shares is a great move from Grab.","text":"I view Grab as a better investment. Grab will definitely cut more incentive from drivers and food riders to narrow down break even or go for profit. Plus buying over Trans-Cab to get more market shares is a great move from Grab.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":7,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/220827476119664","repostId":2367679393,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":220819102658648,"gmtCreate":1694932310697,"gmtModify":1694932315110,"author":{"id":"4111980020727242","authorId":"4111980020727242","name":"Ling Wong","avatar":"https://community-static.tradeup.com/news/107374ae87e520994bb24824fa99fead","vip":1,"crmLevel":3,"crmLevelSwitch":0,"idStr":"4111980020727242","authorIdStr":"4111980020727242"},"htmlText":"Share your opinion about this news…","listText":"Share your opinion about this news…","text":"Share your opinion about this news…","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":9,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/220819102658648","repostId":2367679393,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":220813880455200,"gmtCreate":1694930885854,"gmtModify":1694930890497,"author":{"id":"3583033675115574","authorId":"3583033675115574","name":"hellodarz888","avatar":"https://static.tigerbbs.com/4e5f7fa39ea3c821aa8099f517287dcb","vip":1,"crmLevel":7,"crmLevelSwitch":1,"idStr":"3583033675115574","authorIdStr":"3583033675115574"},"htmlText":"Neither maybe","listText":"Neither maybe","text":"Neither maybe","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":9,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/220813880455200","repostId":2367679393,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":28,"commentSize":5,"repostSize":3,"favoriteSize":1,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2367679393"}