Should you take a crack at Sea Limited (NYSE:SE), the Singapore-based consumer internet firm that took off like a rocket during the new normal? Although there’s plenty to like for those with a patient outlook, most investors will probably want to keep the powder keg dry for a far superior entry point into SE stock.
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Sea Limited was one of the more-discussed foreign investments even prior to the novel coronavirus pandemic. But SE stock truly came alive when the coronavirus forced countless numbers of workers into their homes. Thanks to the underlying emphasis on connected services, though, Sea Limited was among the lucky few entities that benefitted from the catastrophe.
However, now SE stock is down nearly 45% on a year-to-date (YTD) basis. In turn, investors who missed out on the first ticket to party down are doing some serious thinking. Fundamentally, the underlying narrative hasn’t changed. Instead, what did change were factors outside of Sea’s control, particularly blistering tensions in eastern Europe and the Federal Reserve’s rumored response to soaring consumer inflation.
Still, the problem is that SE stock is down 45% YTD. Whether by the underlying company’s own doing or by external factors, a security losing that much market value over a short period is always a cause for concern.
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While I certainly don’t represent the final word on the discipline of technical analysis, presumably most adherents to the methodology would warn investors away from SE stock at the present juncture. Essentially, the current price action (following a devastating erosion) is too pensive, implying a lack of confidence among bulls to bolster SE stock shares.
Therefore, I’m not gung-ho about buying the security at the moment. But should the volatility finally dissipate, investors ought to consider switching sides.
Compelling Market Undergirds SE Stock
One of the lessons that we all learned about the recent geopolitical flashpoints that contributed to the global market meltdown is the liability of dependency. For instance, the primary reason why President Joe Biden’s administration is concerned about Russia’s possible planned invasion of Ukraine is that it sparks a new world order.
As New York Times columnist David Leonhardt wrote recently, “If the world is entering an era in which countries again make decisions based, above all, on what their military power allows them to do, it would be a big change.” In other words, forget laws, principles and treaties: if you’ve got the tanks and other military hardware, you can invade and colonize lesser-equipped nations at will.
Therefore, SE stock is one of the most holistic long-term plays available, in my humble opinion. For one thing, Southeast Asia is fertile ideological ground, with the U.S. and western allies having a clear opportunity to turn the region into a counterweight against China’s increasing influence on the world stage.
More importantly, Southeast Asia is perhaps the next big thing when it comes to global investing opportunities. According to data compiled by Statista.com, in 2021, “the internet economy size across Southeast Asia was valued at approximately 174 billion U.S. dollars. This was forecasted to increase dramatically by 2025, in which the internet economy in Southeast Asia was expected to reach 363 billion U.S. dollars.”
Of course, anyone can make projections. But the beautiful part for SE stock is that the overwhelming consensus calls for the region to command serious growth. As proof, Reuters noted that Southeast Asia’s internet economy could reach $1 trillion by 2030. Providing the impetus for such a forecast is increased embracement of online shopping and food delivery services.
Play the Waiting Game
Despite the lucrative potential that SE stock features, I’ll repeat the same principle mentioned above; basically, you don’t want to fight the tape. Whether it’s the Russia-Ukraine conflict, inflation, Covid-19 or some other headwind, Wall Street is very concerned about economic viability. Therefore, waiting it out for clarity would likely be the wisest move.
How far could shares tumble? I don’t want to sound alarmist but a return back to approximately the $60 level wouldn’t be out of the question if circumstances go awry. With everything going bonkers over the last two years, I’m in no hurry to make drastic moves with my money.
But once enough risk has been taken off the table and following a technical stabilization of SE stock, it would be one of my top speculative ideas to consider. Very simply, the forward-looking backdrop is too enticing to ignore.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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