Asian e-commerce and gaming company Sea Limited reported second-quarter results on Tuesday that topped revenue estimates as it raised guidance. The stock was up more than 600% in just two years.
Sea said revenue totaled $2.3 billion, up 158.6% year over year, exceeding analysts' estimates of $1.97 billion.
The company reported an adjusted loss of 61 cents a share, while analysts expected Sea to report an adjusted loss of 51 cents.
E-commerce revenue rose 160.7% to $1.2 billion, while digital entertainment revenue rose 166.8% to $1 billion.
Sea said its "Free Fire" game reached more than 1 billion downloads on Google Play and ranked third globally by average monthly active users for mobile games on Google Play in the second quarter.
The game also achieved a new record high of more than 150 million peak daily active users in the quarter.
In the U.S., "Free Fire" was also the highest-grossing mobile battle royale game for two consecutive quarters and was the second-highest grossing mobile game on Google Play for the second quarter.
Bookings were $1.2 billion, up 64.8% year on year. Quarterly active users reached 725.2 million, up 45.1% year-on-year.
Looking ahead, Sea said it expects bookings for digital entertainment in 2021 to range from $4.5 billion and $4.7 billion, up 44.4% from 2020 at the midpoint of the revised guidance.
The company also expects revenue for e-commerce to range from $4.7 billion and $4.9 billion, up 121.5% growth from 2020 at the midpoint of the revised guidance.
Dominance in a digital economy
Sea Limited is a conglomerate of digital products and services that include e-commerce, gaming, and digital payments. Its business segments dominate the market in SEA, much as Amazon dominates e-commerce in the United States.
According to a Google report, the SEA region's digital economy is worth (shown as GMV, or gross marketplace volume) approximately $100 billion as of 2020. Sea Limited captured $35.4 billion of that through its e-commerce business, Shopee, alone in 2020. Sea's management claims that Shopee is the most popular shopping app in SEA by monthly active users and time spent on the app. This level of engagement shows up in the financials. Shopee's GMV grew to $12.6 billion in 2021 Q1, a 103% increase year over year.
Sea's business goes well beyond e-commerce. It owns a payments business called Sea Money that offers mobile wallet services to 26.1 million paying users. Digital entertainment is Sea's third segment, which houses its game development studio, Garena, creator of Free Fire, the world's most downloaded mobile game in 2020.
Sea Limited's strong presence in e-commerce, payments, and gaming has fueled the company's growth trajectory thanks to the digital nature of the economy in SEA. Sea Limited generated just $345 million in revenue in 2016, but the company is expected to do $8.3 billion in 2021, growing 95% per year over this stretch.
Sea Limited could be positioned to continue its rapid growth over the coming years. Roughly half of the 670 million inhabitants of SEA are under the age of 30, and 68% of households use smartphones.
Meantime, Sea Limited has expanded aggressively, pushing into Latin America for new expansion opportunities. Sea Limited started by launching Shopee in Brazil in late 2019 and is using the popularity of Free Fire to gain recognition, making Shopee the only licensed seller of Free Fire merchandise and signing a deal to become an official sponsor of Brazil's national football team. These moves have helped the Shopee app grab an 18% market share in less than two years.
Sea Ltd is growing rapidly, yet doesn't appear overvalued at the current price.