In 2022, shares of Sea Limited (NYSE: SE) dropped by 77%. This was followed by an additional 22% decline in 2023. However, in 2024, Sea Limited stock made a remarkable comeback with a 162% gain, making it one of the best performers on the stock market. With a market capitalization of $61 billion as of this writing, Sea is a large-cap stock. And such a steep move for a company of this size is surprising. But Sea had plenty of company among large-cap stocks.
Joining it on its triple-digit climb in 2024 were Axon Enterprise (NASDAQ: AXON) and Spotify Technologies (NYSE: SPOT), which gained 130% and 138%, respectively. Here’s why shares of Sea, Axon, and Spotify soared last year, plus a look at which of them has the most upside potential in 2025.
1. Sea Limited
To understand why Sea stock is surging, you need to look no further than its revenue growth rate. In 2023, the company’s revenue rose by a ho-hum 4.9%. However, revenue has surged by a far more robust 25.6% year over year through the first nine months of 2024. When a company’s top-line growth accelerates like this, it’s normal for the stock price to follow.
Sea has a video game unit, a financial services business, and an e-commerce platform. The e-commerce space in Asia (where the company is based) is particularly competitive but also full of potential. Sensing an opportunity, management spent heavily on sales and marketing for e-commerce in late 2023 — its spending more than doubled to $879 million in the fourth quarter alone. This led to a quarterly net loss, but it seems to have paid off with growth for the segment.
In Q3 2024, Sea’s e-commerce hit a year-to-date high of 43%. What’s fascinating about this growth is that management has already pulled back on its e-commerce sales and marketing spending — it was down 11% year over year in Q3. In short, growth is still surging in response to its prior investments, and the company is now experiencing accelerated growth across all three business segments.
2. Axon Enterprise
Axon Enterprise’s financials look impressive, with a revenue increase of 130% in 2024. However, its valuation has spiked rapidly, making it one of the most expensive stocks among large-cap companies. Rapid valuation spikes such as this can often be followed by equally swift pullbacks.
While Axon remains a great company, its stock isn’t my top pick for 2025 due to its high valuation and potential for a sharp correction.
3. Spotify Technologies
Spotify’s financials look great right now, with a revenue increase of 138% in 2024. However, the company has raised prices two years in a row and recently conducted layoffs. These moves improved the profitability of its operations, but they can’t be repeated year after year.
Therefore, I wouldn’t be surprised if Spotify’s growth cools in 2025 and profit improvements plateau. That’s why Spotify isn’t my top pick for 2025 either.
Top Pick: Sea Limited
Of these three stocks, Sea is my top pick for 2025. Not only is its e-commerce business surging, but its other two business segments are also experiencing accelerated growth. In Q3, financial services revenue was up 38% year over year, and at just $616 million for the quarter, the unit still has lots of room to grow.
Meanwhile, bookings for its video game business also jumped 24% in Q3, pointing to future growth as bookings convert to revenue. Sea Limited’s business is booming as much as Axon and Spotify’s are. However, its stock trades at just 4 times sales, making it the cheapest stock of the three, which is why I expect it to have the most upside potential among them in 2025.
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These 3 Large-Cap Stocks Doubled in 2024. Which One Has the Highest Upside Potential for 2025? was originally published by The Motley FoolView Comments
