We recently published a list of 10 Best Internet Retail Stocks to Buy Now. In this article, we are going to take a look at where Sea Limited (NYSE:SE) stands against other best internet retail stocks to buy now.
According to a report published by FTI Consulting, the United States e-commerce is experiencing a revival after a period of stagnation post-COVID. After 18 months of slow growth, e-commerce sales began to pick up again in early 2023 as consumers resumed shopping habits that had been altered during the pandemic. The report notes that e-commerce sales growth represented 46% of total retail sales growth in 2023 and surged to 57% in the first quarter of 2024, marking its highest contribution since 2017, excluding pandemic spikes.
Consumers have adopted the trend of shopping online as despite the reopening of physical stores, many consumers continue to prefer online shopping. The report indicates that foot traffic in stores remains lower than pre-pandemic levels, with many Americans choosing to shop online rather than visit physical locations. This shift suggests a long-term change in consumer behavior, as evidenced by ongoing declines in in-store visits and increased e-commerce market share.
Talking about the pandemic era from 2020 to 2022 total retail sales in the United States (excluding auto and gas) increased by 31%, compared to only 12.2% from 2017 to 2019. The report suggests this translates to an additional $1.9 trillion in retail spending above pre-COVID norms. This increased spending benefited the e-commerce segment as it was able to capture 87% of the increase in total retail spending during the height of the pandemic lockdowns.
Looking forward, the United States’ e-commerce sales are projected to grow at a sustainable rate of high to mid-single digits annually. This is a significant slowdown from the mid-teens growth rates seen before COVID but still sufficient for continued market share gains against traditional retail channels.
Moreover, the report also highlighted that newcomers including Temu, Shein, and TikTok Shop are entering the US e-commerce market. These newcomers are disrupting the established players through a strategy of becoming low-cost retailers. For instance, Temu achieved $14 billion in global gross merchandise value (GMV) sales in 2023 and is targeting $30 billion for 2024. On the other hand, Shein captured 40% of the fast fashion market domestically and had an estimated global GMV of $42 billion in 2023. Moreover, TikTok Shop was launched in 2023 and is aiming for $50 billion in global e-commerce sales by 2024.
The report suggests that while these platforms may attract budget-conscious consumers, they may not significantly threaten established e-commerce giant’s dominance due to perceived differences in product quality and brand positioning.
Looking ahead as per FTI Consulting the US online retail sales are expected to hit $1.2 trillion in 2024 translating to a 9.8% increase year-over-year. Moreover, the e-commerce market share is also expected to increase from 21.6% in 2023 to 22.7% by the end of the current year.
Moreover, some of the key trends identified by the reports are a sharp increase in the closing of physical retail stores due to increased labor costs, rents, and the feasibility of selling online. In addition to this, another key trend is the use of artificial intelligence among internet retailers, which helps engage with customers more closely and enables a personalized shopping experience.
“E-commerce is growing faster than expected and as new avenues of selling online open up, companies are bound to keep up with trends and innovative strategies. According to a report by Forbes, the e-commerce industry is expected to grow to a valuation of $7.9 trillion by 2027 from $6.3 trillion in 2024. In 2027, 23% of retail purchases are expected to be made online, up from 20.1% in 2024.
To compile the list of 10 best internet retail stocks to buy now we used the Finviz stock screener. Using the screener, we shortlisted the internet retail stocks by their market capitalization. Next we used Insider Monkey’s Q2 2024 hedge funds database to rank the stocks by the number of hedge fund holders. Please note that the stocks are arranged in ascending order of the number of hedge funds.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Sea Limited (SE)’s Triple Threat: E-Commerce, Fintech, and Gaming Powerhouse
A person livestreaming their gameplay on a mobile device with integrated payment options.
Number of Hedge Fund Holders: 63
Sea Limited (NYSE:SE) operates a multifaceted business model that leverages the synergies between e-commerce, digital financial services, and digital entertainment. These three business segments of the company are represented by its main platforms including Shopee, SeaMoney, and Garena.
Before diving into the financial performance of Sea Limited (NYSE:SE) it is important to understand each segment. Shopee is the e-commerce platform of the company that facilitates online shopping, providing a platform for both consumers and sellers. It integrates payment systems and logistics to enhance user experience. Whereas, SeaMoney, the digital financial services wing of the company offers various financial services, including digital payments, loans, and insurance products. It operates services like ShopeePay and SeaBank.
Lastly, Garena, which is a digital entertainment platform, is known for developing and publishing online games, with its flagship game being Free Fire, which has gained immense popularity globally.
The second quarter of fiscal 2024 showed that the company grew its total GAAP revenue by 23% year-over-year to reach $3.8 billion. Revenue growth was on the back of exceptional performance in its e-commerce and digital financial services segments. The e-commerce segment revenue grew 40.3% year-over-year, whereas the digital financial services revenue was up 21.4% during the same time.
The digital entertainment segment was also a success story as gross bookings for the segment improved by 21% year-over-year to reach $537 million.
What’s more impressive is Sea Limited’s (NYSE:SE) gross profit, which grew 9.2% during the same time to reach $1.6 billion. Looking ahead, management believes that it will become an adjusted EBITDA-positive company in Q3 and has also improved its Shopee full-year guidance to mid-20% growth. Sea Limited (NYSE:SE) is one of the best internet retail stocks to buy now.
Artisan Developing World Fund stated the following regarding Sea Limited (NYSE:SE) in its Q3 2024 investor letter:
“Top contributors to performance for the quarter included Southeast Asian e-commerce leader Sea Limited (NYSE:SE). Sea rose due to an improved competitive environment in its Shopee e-commerce business that set the stage for commission increases, while a positive inflection in its gaming business surprised market participants.”
Overall, SE ranks 5th on our list of best internet retail stocks to buy now. While we acknowledge the potential of SE to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
