The S&P 500 (^GSPC 1.26%) performed very well in 2024, with a 25% gain, but it ended the year on a sour note, with a 3.3% drop in December.
The index is relatively expensive right now. It trades at a price-to-earnings (P/E) ratio of 25.1, which is a 38% premium to its long-term average of 18.1 going back to the 1950s. Since there is some uncertainty on the horizon with a new U.S. government preparing to take office, it's possible the S&P 500 sell-off will persist in the short term.
Investors can use market dips to buy high-quality stocks at a discount, but this can also be a good time to trim underperforming stocks to free up cash for other opportunities in the future. With that in mind, here's why Sea Limited (SE 1.38%) might be a great stock to buy during the S&P 500 sell-off, whereas Snowflake (SNOW 2.99%) could be one to leave behind.
The stock to buy: Sea Limited
Sea Limited is based in Singapore, and it's a triple threat when it comes to the digital economy, with operations in e-commerce, digital entertainment (gaming), and digital financial services. Sea stock soared by a whopping 175% in 2024, but it's still down from its 2021 peak, and I think the recovery will continue in 2025 and beyond.
Shopee is Sea's hybrid consumer-to-consumer and business-to-consumer e-commerce platform. It processed 2.8 billion orders during the third quarter of 2024, which ended Sept. 30, and half of the orders across Asia were delivered in two days or less. Faster deliveries are part of Sea's strategy to reduce Shopee's cost-per-order to make the platform more profitable, but they also entice customers to purchase more frequently.
Shopee has synergies with Sea's digital financial services business, which is headlined by SeaMoney. It lends money to sellers on Shopee to help them expand their stores, and it also offers buy now, pay later loans to consumers to fund purchases. The SeaMoney platform has over 24 million active customers, and it had a record $4.6 billion worth of outstanding loans at the end of Q3, which was a 73% jump from the year-ago period.
Digital entertainment is Sea's third and final segment. It's home to the Garena mobile game development studio, which is responsible for the global smash hit Free Fire. It continued to be the most downloaded mobile game in the world during Q3, and it averaged over 100 million daily active users. This part of Sea's business is still struggling to match the revenue numbers it delivered at the height of the pandemic in 2021, when gamers were under lockdown restrictions and spent more time online.
Sea's 2024 fourth quarter wrapped up on Dec. 31, but we won't receive its official results until February. Wall Street's consensus forecast, provided by Yahoo!, suggests the company generated a record $16.5 billion in revenue for the year, representing almost 27% growth from the prior year. That growth rate would mark an acceleration from 2023, when Sea's revenue grew by just 4.9%.
If the first three quarters of 2024 are anything to go by, the e-commerce segment will account for most of Sea's overall revenue for the year, and also most of its growth. Revenue from the digital entertainment segment, on the other hand, is likely to decline as the gaming business continues to sputter -- but it delivered positive user growth during Q3, so that could translate into renewed revenue growth as we progress through 2025.
Despite the incredible gain in Sea stock during 2024, it's still cheap relative to its history. It trades at a price-to-sales (P/S) ratio of just 4.1, which is far below its long-term average of 9.4, dating back to when the company went public in 2017:
SE PS Ratio data by YCharts
Sea stock would have to more than double from where it currently trades just to return to its average P/S ratio. Considering the company's revenue growth is now accelerating, 2025 might be another great year for its stock. Therefore, any dip during the S&P 500 sell-off is likely a potential buying opportunity.
The stock to sell: Snowflake
Snowflake stock had a complete opposite year to Sea Limited in 2024, sinking by 18% despite the roaring bull market in the S&P 500. The company invented the Data Cloud, which helps organizations aggregate their valuable information so it can be analyzed to extract deeper, more valuable insights. Now, it's betting heavily on artificial intelligence (AI), but that wasn't enough to lift its stock last year.
Snowflake launched a platform called Cortex AI in 2023, which it continues to develop. It allows businesses to access the latest large language models (LLMs) from leading AI companies such as Anthropic and Meta Platforms, which they can pair with their own data to build powerful AI software applications.
Cortex also offers businesses a suite of unique AI tools, such as the Snowflake Copilot virtual assistant, which can generate computer code from simple text-based prompts to accelerate software development. Then there's Document AI, which businesses can use to easily extract valuable data from unstructured sources such as invoices and contracts.
As of its fiscal 2025 third quarter, ended Oct. 31, Snowflake said 3,200 of its 10,618 customers were using its AI products already.
Snowflake has struggled with decelerating revenue growth over the past couple of years as competition ramped up in the cloud space, and AI hasn't been enough to arrest the slowdown so far. The company is on track to generate $3.4 billion in product revenue in fiscal 2025, which ends this month. That would be a 29% increase from the previous year, but it's much slower than the 38% growth it delivered in fiscal 2024, and also the whopping 70% growth from fiscal 2023.
That's a problem, because Snowflake is spending record amounts of money on line items such as research and development to build AI products, and its slowing revenue growth is leading to blowout losses at the bottom line. The company lost $958 million during the first three quarters of 2025 alone, which was a staggering 43% increase from the same period in fiscal 2024.
Given all of those challenges, you might think Snowflake stock is trading at a bargain valuation right now, but it isn't. It trades at a price-to-sales ratio of 15, making it substantially more expensive than Microsoft, Amazon, and Alphabet -- the three companies that lead the cloud industry and have dominant positions in the AI software space:
SNOW PS Ratio data by YCharts
Snowflake stock plunged by more than 10% in December alone, which was three times the size of the loss in the S&P 500. I think that's an early warning sign that the stock will underperform yet again in 2025, so investors might be better off parking their money elsewhere.
