Shares of Jumia Technologies fell 2.2% in pre-market trading after reporting disappointing 4Q revenues. The online marketplace targeting African countries reported revenues for the quarter of €41.8 million, a decline of 15.3% year-on-year, that fell short of consensus estimates of €45 million. Operating losses for the quarter improved 35% year-on-year to €40 million from €61.1 million in the year-ago quarter.
Jumia’s (JMIA) Co-CEOs Jeremy Hodara and Sacha Poignonnec commented, “We continued to make significant strides towards breakeven during the fourth quarter of 2020. Gross Profit after Fulfillment expense reached a record €8.4 million during the quarter.”
“In parallel, efficiencies across the full cost structure allowed us to decrease Fulfillment, Sales & Advertising and General & Administrative expenses (excluding share-based compensation) by 18%, 34% and 36% respectively, year-over-year. As a result, Adjusted EBITDA loss contracted by 47% year-over-year, reaching €28.3 million,” Hodara and Poignonnec added.
The company’s active consumers in 4Q rose by around 12% to 6.8 million with growth in both new and returning customers. However, orders on the JMIA marketplace declined 2.6% year-on-year to 8.1 million as a result of a 14% fall in digital services transactions on the JumiaPay app. The company’s gross merchandise value (GMV) dropped 21.1% to €231.1 million in the fourth quarter. (See Jumia Technologies stock analysis on TipRanks)
While JMIA did not give specific financial guidance due to pandemic-led uncertainty and resulting economic challenges, the company remains committed to breaking even and reducing its adjusted EBITDA loss in FY21.
Following the earnings announcement, Raymond James analyst Aaron Kessler reiterated a Hold on the stock. Kessler noted that the company’s mixed 4Q results for GMV were slightly below his expectations as “profitability-driving initiatives and a challenging macro environment continue to weigh on the top-line”. Kessler further added that JMIA is rebalancing “its business mix toward everyday essential items and higher-margin categories.”
However, the analyst believes that the improvement in JMIA’s business results “will be gradual given the early stage of e-commerce in Africa.”
The rest of the Street is sidelined on the stock with a Hold consensus rating based on 3 Holds. The average analyst price target of $40 implies around 23% downside potential to current levels.
According to the TipRanks Smart Score system, JMIA scores a 7 out of 10 indicating that the stock is likely to perform in line with market averages.
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