Stock Analysis & Ideas

Jumia: UPS Partnership Was a Much-Needed Catalyst

Jumia Technologies (JMIA) operates a pan-African e-commerce platform. I am bullish on the stock.

There’s no denying it: JMIA stock has disappointed many investors over the past year. The share price has sunk from more than $36 to $11 and change.

It’s frustrating for shareholders who believe in the growth of Africa’s economy and in global e-commerce. Is there hope for a turnaround?

Indeed, there is. JMIA recently perked up on the heels of a major, potentially game-changing announcement. Just maybe, there’s a reason for optimism with Jumia in 2022.

A Delivery of Good News

You might think of United Parcel Service (UPS) as a delivery service that’s based entirely in the U.S. However, it may surprise you to discover that the company actually has a multi-national presence.

While UPS is indeed based in Atlanta, the company is seeking a wider market footprint in multiple countries/continents. Among them is Africa, and that’s where a partnership with Jumia comes into the picture.

Reportedly, UPS will use Jumia’s distribution network to expand in Africa. This news is so momentous that it caused the JMIA stock to finish ~25% higher yesterday.

According to Renzo Bravo, Jumia’s head of strategy for the Indian subcontinent, the Middle East, and Africa, the arrangement will enable UPS to build a greater presence in a number of African markets and tap into an anticipated boom in online retail.

A Win-Win Scenario

How big is the market that UPS wants to tap into? “We believe that Africa has the potential to reach around $180 billion in online trade by 2025,” Bravo explained.

Thus, we can see how UPS will benefit from this deal. As for Jumia, Apoorva Kumar, the company’s senior vice president of logistics, provided a simple explanation.

As Kumar pointed out, the collaboration with UPS will enable Jumia to make use of UPS’s network, which spans 220 countries and territories, in order to help users deliver their packages.

Furthermore, the collaboration with UPS will commence in Nigeria, Morocco, and Kenya, with the aim of adding more countries, Kumar stated.

Meaningful Acceleration

Of course, a partnership with UPS, by itself, shouldn’t persuade anyone to buy shares of JMIA stock. There are many other factors to consider.

In particular, any prospective investors should look into Jumia’s financials. Sure, you may expect Africa’s e-commerce market to expand during the coming years. This will depend on the continent’s Internet penetration, as well as the rising middle class that can afford to buy more products online.

Those are important considerations, no doubt. However, prospective shareholders must ask themselves whether Jumia is the right business to invest in to capitalize on long-term emerging market e-commerce trends.

So, now is a great time to look under the hood and see how Jumia is going financially. The most recent data for this comes from the company’s results from Q4 2021.

Jumia’s co-CEOs, Jeremy Hodara and Sacha Poignonnec, proudly declared that Jumia’s Q4 2021 results “marked meaningful acceleration and growth momentum with new records reached across all usage metrics.”

Breaking Down the Numbers

What does “meaningful acceleration” look like? First, Jumia’s quarterly active consumers increased 29% year-over-year to 3.8 million. That’s a quarterly record for the company.

Next, Jumia celebrated another quarterly record, with 11.3 million orders. That figure represents a whopping 40% year-over-year improvement and is definitely a bragging point for Jumia.

Still not convinced? No problem – consider this: during 2021’s fourth quarter, Jumia posted yet another company record. In particular, the company posted $330 million respectively in gross merchandise value, also known as GMV.

GMV is one of the retail segment’s most important metrics for investors to monitor. Without robust GMV growth, it’s difficult to truly believe in any e-commerce business.

Fortunately, Jumia grew the company’s GMV in Q4 of 2021 by 20% on a year-over-year basis. It’s a sign that Africa is bustling with online shopping activity, no doubt.

Most importantly, though, the company’s GMV growth shows that Jumia is able to move products in very large numbers. Jumia is an undeniable force in African e-commerce, and the financial data cements the company’s position as a force to be reckoned with.

Wall Street’s Take

Turning to Wall Street, JMIA stock comes in as a Hold, based on one Hold rating assigned in the past three months. The average Jumia price target is $11, implying 2.9% downside potential.

The Takeaway

The announcement of the partnership with UPS came right on time. JMIA stock was in need of a catalyst, and this is a big one.

In light of this development, investors should consider adding Jumia shares. The stock price is still quite low and has plenty of room to run from here.

On top of that, Jumia’s financial data is highly encouraging and should provide investors with optimism. Even if you’re already invested, you might want to consider adding some JMIA shares, as the company is clearly in growth mode.

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