Despite Sea Limited’s soaring cash flow, its shares are trading at a reasonable price.
A solid first-quarter report recently boosted shares of Sea Limited (SE 4.17%). The company also convinced several Wall Street analysts that its business is worth more than its market valuation.
Benchmark analyst Fawne Jiang recently raised her price target for the e-commerce, entertainment, and finance conglomerate to $87 per share. The new target implies a gain of about 31% from recent prices.
Some good reasons to be bullish on Sea Limited stock
Sea Limited stock is still miles below the peak it reached in 2021, but Jiang has plenty of reasons to expect big gains ahead. The company’s e-commerce division reported first-quarter gross merchandise volume that soared 36% year over year, thanks to its unmatched logistical capability.
Shoppee is bolstering client and consumer retention with an unmatched logistics service. SPX Express completed deliveries within three days or less for about 70% of all orders placed in Asia during the first quarter.
The company’s financial services segment outperformed with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) that soared 50.3% year over year to $148 million in the first quarter. Non-performing loans over 90 days past due remained stable at a very manageable 1.4% of its total loan portfolio.
Sea Limited’s entertainment division reported bookings that climbed 10.8% year over year, thanks to the resurgence of Free Fire, which still has one of the largest user bases of any mobile game on the planet.
A buy now
Sea Limited reported deeply negative free cash flow in 2022, but this figure has rocketed to more than $2 billion over the past 12 months.
Despite the company’s rapid profit growth, the stock has been trading for just 19.3x trailing free cash flow. Following Jiang’s advice and adding some shares of Sea Ltd. to a well-diversified portfolio looks like a smart move for most growth-seeking investors.
Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Sea Limited. The Motley Fool has a disclosure policy.