Jumia Technologies AG (JMIA) is a German e-commerce platform that operates exclusively in Africa. Its platform consists of a marketplace that connects sellers with consumers, a logistics service that enables the shipment and delivery of packages, and payment services that facilitate transactions among participants. The company has also recently launched a gaming division. JMIA is active across 11 countries in Africa, accounting for more than 70% of Africa’s internet users.
JMIA was one of the best performing stocks in 2020 on the company’s rising gross profits and declining operating losses. In the third quarter ended September 30, 2020, JMIA’s marketplace revenue increased 19% year-over-year, resulting in a 22.5% rise in gross profits.
Its fintech platform JumiaPay’s total payments volume (TPV) accelerated 50%, more than doubling on-platform TPV penetration. JMIA also made significant progress on its path to profitability during the quarter, with its operating loss decreasing 49% year-over-year due primarily to its implementation of cost efficiency initiatives.
With robust technology and e-commerce growth in emerging markets amid the coronavirus pandemic, JNIA stock has gained 127.6% year-to-date. This impressive performance, and potential upside based on several factors, has helped it earn a “Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates JMIA:
Trade Grade: B
JMIA is currently trading higher than its 50-day and 200-day moving averages of $31.39 and $14.00, respectively, indicating that the stock is in an uptrend. In fact, the stock’s 250% return over the past three months reflects a solid short-term bullishness.
JMIA registered 6.7 million annual active consumers in the third quarter, a year-over-year increase of 23%. With the company’s continued focus on both new client acquisition and existing consumer’s re-engagement, marketplace orders reached 6.6 million during the quarter. JMIA’s site recorded 113 million visits on Black Friday 2020 and a 55% jump in transactions on Jumia’s payment platform compared to Black Friday 2019.
Buy & Hold Grade: B
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, JMIA is well positioned. The stock is currently trading just 11.6% below its 52-week high of $49.00.
JMIA went public in April 2019. It initially impressed investors with its robust gross merchandise volume (GMV) and revenue growth in 2018. However, in May 2019, activist investor Andrew Left of Citron Research called out an “obvious fraud” at the company and said its shares were “worthless.” But the firm changed its tune last year and is currently long JMIA stock. In fact, the firm recently said that the Black Friday success “validated” Jumia’s opportunity and should bode well for the company’s future.
JMIA is now focusing on getting to EBITDA breakeven soon in its African e-commerce sales. Research firm McKinsey estimates that by the year 2025, African e-commerce will be worth $75 billion. Furthermore, Africa is the world’s fastest-growing continent. Africa’s surging population and untapped economic potential bode well for JMIA.
Overall POWR Rating: B (Buy)
Overall JMIA is rated “Buy” due to the booming African e-commerce market, improving fundamentals, analyst confidence, and short-and-long-term bullishness, as determined by our overall POWR Rating.
Internet penetration rates in Africa are presently far below 50%, making it difficult for e-commerce to thrive. However, African consumers and businesses have pivoted of late to adopt digital products and services more universally. In fact, investors are drawn by potential of JMIA to become the “Amazon of Africa.”
The success of JMIA depends largely on how rapidly Africa goes digital. Analyst sentiment, which gives a good sense of a stock’s future price movement, is good for JMIA. Analysts expect the company’s revenue and EPS 2021 to grow 27.2% and 13.6%, respectively year-over-year. Hence, while it is still a small company, JMIA’s growth runway could be massive as the early-stage African market grows steadily.
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JMIA shares were trading at $47.19 per share on Thursday afternoon, up $3.89 (+8.98%). Year-to-date, JMIA has gained 16.95%, versus a 1.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Sidharath Gupta
Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...
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