This Unstoppable Stock Is Crushing the S&P 500 in 2025, and Here's Why It's Probably Going Higher

Key Points

• Sea Limited is a triple threat with its online presence in commerce, financial services, and entertainment.

• All three of Sea's core businesses generated solid revenue growth during the second quarter of 2025.

• Sea stock is crushing the S&P 500 this year -- surging 66% so far this year -- but it's still cheap.

• 10 stocks we like better than Sea Limited ›

Sea Limited (NYSE: SE) is a Singapore-based tech giant with operations in e-commerce, digital financial services, and gaming. Its stock has soared by 66% already in 2025 on the back of the company's accelerating revenue growth and surging profits, crushing the S&P 500 index, which is up by just 10% year to date.

Despite its recent rally, Sea stock is still down 51% from its 2021 record high, when a frenzy in the tech sector drove it to an unsustainable valuation. Here's why I think the stock will continue to recover, and outpace the S&P 500 in the process.

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Image source: Getty Images.

A triple threat in the digital economy

Shopee is Sea's hybrid consumer-to-consumer and business-to-consumer e-commerce platform. It's the largest app of its kind in Southeast Asia, and it's quickly breaking into new markets across Latin America. Shopee processed 3.3 billion orders valued at $29.8 billion during the second quarter of 2025 (ended June 30) alone, with both numbers climbing by 28% year over year.

Sea also operates a booming digital financial services business. Its Monee platform lends money to merchants on Shopee to help them grow their businesses, and it also writes small buy now, pay later loans to consumers, which increase their purchasing power. Monee's loan book grew by an eye-popping 90% to $6.9 billion during Q2, driven by a record-high 30 million active users on the platform.

The company's third segment is digital entertainment, which is home to the Garena mobile game development studio. It's responsible for several smash hits like Free Fire, Call of Duty: Mobile, and Arena of Valor. The digital entertainment segment struggled to build on its pandemic-era momentum. Its quarterly active users reached a peak of 729 million in third-quarter 2021 as gamers spent more time online while under lockdowns and social restrictions, but declined sharply when conditions returned to normal.

However, it reported 664.8 million active users during Q2, which marked the third consecutive quarter of sequential growth. This is a sign that perhaps a sustained recovery is underway.

Accelerating revenue growth and soaring profits

Sea generated $5.3 billion in total revenue during Q2, which was up by a whopping 38.2% from the year-ago period. That marked an acceleration from the 29.6% growth the company delivered during the first quarter, highlighting the significant momentum across its businesses. Here's how the Q2 revenue number was broken down:

Data source: Sea Limited.

The e-commerce segment remained Sea's dominant source of revenue by a wide margin, but the digital financial services business continued to grow at the fastest pace, which has been the status quo over the last few quarters.

But the e-commerce segment typically operates on razor-thin profit margins, because Shopee focuses on providing customers with the lowest possible prices. It still generated $227.7 million in adjusted (non-GAAP) EBITDA, which is Sea's preferred measure of profitability, but the digital financial services and digital entertainment businesses made far more money. They generated a combined $623.5 million in adjusted EBITDA on significantly less revenue.

So, while e-commerce drives Sea's top line, the company's other two segments are the source of most of its profits, which highlights the benefits of having such a diversified business. Sea's total adjusted EBITDA surged by 85% year over year during Q2, coming in at $829.2 million.

Sea stock looks cheap, despite its recent upside

When Sea stock peaked in 2021, its price-to-sales (P/S) ratio was hovering at around 30, which wasn't a sustainable valuation in the long term. However, since the stock is trading 51% below its record high while the company's revenue has grown consistently, its P/S ratio is now at a more reasonable level of 5.4. In fact, it's far below Sea's average P/S ratio of 9, dating back to when its stock went public in 2017.

SE PS Ratio data by YCharts.

Wall Street's consensus estimate (provided by Yahoo! Finance) suggests that Sea's annual revenue could grow to a record $26.4 billion in 2026, which places its stock at a forward P/S ratio of just 3.6. In other words, Sea stock could climb by 104% over the next 18 months to reclaim its 2021 record high of $357, and its P/S ratio would still be below its long-term average of 9.

To cap things off, Sea is in a great financial position right now with $10.6 billion in cash and equivalents on its balance sheet. That number is increasing steadily because the company is profitable. This gives management room to invest more aggressively to expand the business and potentially fuel a further acceleration in its revenue growth.

As a result, I think Sea stock is likely to continue moving higher from here, so it's probably not too late for investors to buy.

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Anthony Di Pizio 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.