Is Sea Stock a Buy Now as Growth Accelerates but Margins Tighten?

Sea Limited SE has been benefiting from faster growth across e-commerce, digital financial services and gaming. First-quarter revenues rose 46.6% year over year to $7.1 billion, while adjusted EBITDA increased 9.3% to $1.03 billion.

The trade-off is clear. Sea is investing more heavily in logistics, user acquisition and credit growth, which is supporting scale but limiting near-term margin expansion. Investors must weigh that pressure against a still-substantial growth runway.

Sea’s Growth Profile Is Still Hard to Ignore

Sea’s 2026 sales are estimated at $30.72 billion, up from $23.48 billion in 2025. Annual earnings are projected to rise to $4.15 per share from $3.29, pointing to another year of sizable top and bottom-line expansion.
 

The company also carries a Growth Score of A. That supports the longer-term growth case, although the pace of spending means revenue gains will need to translate into stronger operating leverage over time.

Moreover, Wall Street’s consensus price target implies roughly 26.79% upside from current levels.

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SE’s Shopee Expansion Comes With a Margin Trade-Off

Shopee’s first-quarter gross merchandise value increased 30% year over year to $37.3 billion, while advertising revenues jumped 80%. Monthly active buyers rose 16%, and purchase frequency increased around 12%, showing that scale and engagement are moving higher together.

Adjusted EBITDA fell to $223.2 million from $264.4 million as Sea invested in delivery, fulfillment, ShopeeVIP and user acquisition.

Monee Adds Growth and Credit Risk for Sea

Monee’s consumer and small-business loan principal outstanding reached $9.9 billion at the end of March, up 71.3% year over year. Loans past due by more than 90 days remained stable at 1.1%, suggesting credit quality has held up during the expansion.

Still, provision for credit losses increased 65.1% to $465.5 million. 

Competition also remains demanding. MercadoLibre MELI operates a major commerce and fintech ecosystem in Latin America, while Nu NU is a large digital financial services platform across Brazil, Mexico and Colombia. Grab Holdings GRAB challenges Sea Limited through digital financial services and ecosystem competition in Southeast Asia.

In the past three months, SE outperformed MercadoLibre, Nu and Grab Holdings, shares of which have returned 17%, 3.3% and 0.2%, respectively.

SE Price Performance

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Garena Gives SE a High-Margin Earnings Counterweight

Garena generated $573.6 million of adjusted EBITDA in the first quarter, equal to 61.6% of bookings. Bookings increased 20.1% to $931.4 million, while adjusted EBITDA rose 25.2%, giving Sea a highly profitable counterweight to heavier investment elsewhere.

Free Fire remained a major performance driver, while Arena of Valor delivered record quarterly bookings. That broader contribution is encouraging, but gaming results can still vary with player engagement, content releases and the timing of collaborations.

Sea Trades Below Key Sales-Multiple Benchmarks

SE trades at 1.98X forward 12-month sales, below its five-year median of 2.25X and the Zacks Internet Software industry’s multiple of 4.06. The discount gives investors more room for execution risk than the historical and peer benchmarks imply.

That gap is not automatically a bargain. Shopee’s lower adjusted EBITDA, rising credit-loss provisions and continued spending on growth initiatives mean the valuation case depends on Sea eventually converting scale into better profitability.

Sea Limited is trading at a premium in terms of forward 12-month sales compared with MercadoLibre, Nu and Grab Holdings, shares of which are trading at 1.96X, 2.61X and 3.16X, respectively.

SE Valuation

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SE’s Mixed Signals Favor Patience Over Chasing

Sea’s operating momentum remains attractive, but the current setup does not argue for chasing the shares. Growth across all three core businesses is substantial, yet profitability is being shaped by deliberate investment and faster credit expansion.

The stock currently carries a Zacks Rank #4 (Sell). Sea also has a Momentum Score of B and VGM Score of B. Favorable Style Scores can highlight attractive growth and momentum characteristics, but they are designed to complement the Zacks Rank, not override it. The combination favors patience until earnings-estimate trends improve.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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