Germany-headquartered Jumia Technologies (JMIA) operates an e-commerce and digital payments platform in Africa, Portugal, Germany, and the United Arab Emirates, but its primary business is done in Africa. I am bullish on the stock.
The digital commerce revolution isn’t just local; it’s global and there’s no going back now. As more people in developing countries get internet access and smartphones, as well as disposable income, there’s a market for multi-national e-commerce that’s really still just in its infancy.
Prospective investors can capitalize on this opportunity by taking a position in Jumia stock. However, it’s emotionally difficult to buy a stock when it has lost much of its value over the past year. Frankly, not everyone is willing or able to withstand a sharp drawdown, even if he or she believes in the company.
Jumia stock represents the expansion of ecommerce in a number of emerging nations and especially Africa. There’s a growth story here, but somehow Jumia stock hasn’t found its footing during the past 12 months. The stock did get a nice boost recently, though, and informed investors should understand the catalysts and might even choose to take a long position at its current level.
A High-Conviction Market
For some investors (depending on your location), there aren’t many ways to get pure-play exposure to the African ecommerce market. Jumia stock is available on a major U.S. stock exchange and has plenty of daily trading volume, so it’s an obvious choice.
Meanwhile, Statista posits that the African ecommerce market could reach a value of $33.3 billion this year, and then balloon to $46.1 billion in 2025. If this actually happens, then many investors will wish that they had invested early instead of waiting for confirmation that the African ecommerce revolution is here to stay.
At the same time, Jumia stock looks like an unappreciated gem in the markets as the share price has declined from a 52-week high of $33.87 to around $7. On the other hand, the stock jumped 26% by midday May 17. Clearly, there was something going on in the news that must have prompted this swift share-price move.
It’s not exactly a mystery, as Jumia had just released the company’s first-quarter 2022 financial results. Suffice it to say that this was a make-or-break event for the firm, especially after the share price had lost so much value and many investors undoubtedly felt hopeless.
Admittedly, Jumia isn’t a profitable company, yet. This is why the company’s investors should focus on the long run, meaning years instead of weeks or even months.
Since Jumia’s still working toward profitability, perhaps the expectations were rock-bottom on Wall Street as the company released its fiscal data. Yet, negative sentiment can lead to positive surprises, and that’s exactly what happened as Jumia demonstrated that its growth story – and by extension, the growth story of African e-commerce – is alive and well in 2022.
Taking the Business Forward
If the price action of Jumia stock might dissuade you from making an investment, don’t make any hasty decisions. First, you’ll want to see how the company is doing financially. Most likely, you’ll be pleasantly surprised.
As it turns out, Jumia truly knocked it out of the park during 2022’s first quarter. This is remarkable, considering that the world is dealing with supply-chain constraints and geopolitical upheaval. For international investors, Jumia stock could become 2022’s biggest comeback story.
Before getting to the top- and bottom-line financial stats, we should examine some metrics that are essential to ecommerce businesses. These are measurements which any ecommerce market investor should become familiar with.
To sum it up briefly, in Q1 2022, Jumia reported 3.1 million quarterly active consumers, up 28.7% year-over-year, as well as 9.3 million orders, up a whopping 40.5%. In addition, Jumia’s gross merchandise value (GMV) grew 27% to $252.7 million, and the company’s total payment value (TPV) increased 36.7% to $70.7 million.
Turning now to the top line, Jumia’s revenue ramped up 44.3% to $47.6 million. There’s no denying, then, that Africa is shopping more online and Jumia is benefiting from this emerging trend. Also, Jumia’s gross profit increased by a very respectable 12.6% to $27.7 million.
Granted, Jumia did record another quarter of operating losses, so that’s an area which the company should focus on improving. Still, Jumia co-CEOs Jeremy Hodara and Sacha Poignonnec prepared the company’s stakeholders for a better future, assuring, “We remain focused on taking the business forward on our path to profitability, driving faster usage growth with improved levels of marketing efficiency.”
Wall Street’s Take
According to TipRanks’ analyst rating consensus, JMIA is a Hold, based on two Hold ratings. The average Jumia Technologies price target is $8.95, implying a 19.37% upside potential.
The Takeaway
If you’re bullish on African ecommerce, then Jumia stock deserves a place on your watch list and possibly even in your portfolio. While the company isn’t profitable at the moment, it’s demonstrating improvements in a number of crucial metrics. Therefore, the stock looks like it’s on the comeback trail and double-digit prices may be just around the corner.
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