To The Moon

What happened

Shares of Sea Limited charged higher on Tuesday, surging as much as 8.87%.

The catalyst that sent the tech giant higher was some positive commentary from a Wall Street analyst.

So what

Sea Limited announced yesterday that Shopee, its e-commerce arm, would cease operations in India. Morgan Stanley analyst Mark Goodridge has weighed in on the move, viewing the decision as "a clear positive." In fact, he maintained his overweight (buy) rating and $220 price target on the stock.

He cites two key factors supporting his view. First, the risk/return profile has clearly changed for Sea Limited's entry into India, which the analyst believes is no longer attractive. Secondly, by leaving the market, Sea Limited will limit the losses that normally accompany the early expansion in a new e-commerce market.

Goodridge views Sea Limited as "an emerging Super App in South East Asia" and believes investors are failing to properly value the company's budding e-commerce business.

Now what

It's important to note that while India represented a significant opportunity for Sea Limited, it hadn't yet amounted to any more than a rounding error for the company's business. The country accounted for less than 3% (roughly $33 million) of Sea Limited's gaming sales, or about 1.2% of the company's total revenue.

Still, Sea Limited has challenges ahead. During its fourth-quarter earnings report, released earlier this month, the company reported a slowdown in its gaming business, as bookings of $1.1 billion climbed just 7% year over year after increasing 111% in the prior-year quarter.

This could just be a one-time thing, but investors should watch this metric carefully, as it's often a harbinger of things to come.