Headquartered in Berlin, Germany, Jumia Technologies AG (JMIA) specializes in e-commerce. Operating in Africa, the company functions as an online marketplace for African consumers to buy and sell goods. JMIA primarily operates in three areas — marketplace, logistics service, and payment service.
The stock has gained 362.7% in the past three months. JMIA’s sales and advertising expenses have declined 55% year-over-year, representing its lowest quarterly level since 2017. And its operating loss hit reached a three-year low in its last quarter. Also, JMIA added over 60 brands on the platform during the quarter.
Its impressive performance and potential upside are based on a few factors that have helped the stock earn a “Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates JMIA:
Trade Grade: A
JMIA is currently trading above its 50-day and 200-day moving averages of $24.05 and $12.99, respectively, indicating an uptrend. Moreover, JMIA has gained 194.2% in the past month, reflecting a solid short-term bullishness.
For the third quarter ended September 30, 2020, JMIA’s gross profit increased 22.5% year-over-year as a result of the increase in marketplace revenue. Its total payment volume has increased 50% year-over-year. With the company’s continued focus on both consumer acquisition and existing consumer’s re-engagement, annual active consumers increased 22.8% year-over-year to 6.7 million.
JMIA The company held a Black Friday event from November 6 to November 30 and achieved witnessed 141% year-over-year growth on the number of items sold from top 20 sellers during the event. And on December 8th, Egypt Post and JMIA signed a cooperation protocol aimed at boosting and developing e-commerce trade flows and industry in Egypt. The company opened its logistics services to third-party businesses on November 2, allowing those that wish to leverage its network, technology, and expertise for last mile deliveries across 11 countries in Africa to do so.
Buy & Hold Grade: B
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade takes considers into account, JMIA is well positioned. The stock is currently trading 9.5% below its 52-week high of $40.90, which it hit on November 27th.
While the company’s long-term goal was originally to become the leading e-commerce player in Africa, JMIA has modified its business model since 2016 and aims now to transition into a business-to-business (B2B) facilitator of third-party e-commerce through its marketplace, payments service and logistics network. This change in strategy has so far proved beneficial for the company, tapping into the immense growth potential of e-commerce in Africa.
Peer Grade: C
MercadoLibre, Inc. (MELI) and Fiverr International Ltd. (FVRR) are two other popular stocks in the regional e-commerce space with operations around the world. While FVRR beat JMIA gaining 786.7% over the past year, MELI returned 185% over the same period.
Industry Rank: A
While the companies operating in the e-commerce industry were already in play prior to the pandemic, their growth has been further accelerated by the coronavirus pandemic.
E-commerce platforms are expected to gain in the upcoming months as consumers gain get more comfortable with online shopping. It also has the added advantage of saving time and is more convenient.
Overall POWR Rating: B (Buy)
JMIA is rated “Buy” due to its short-and-long-term bullishness, solid growth prospects, and underlying industry strength, as determined by the four components of our overall POWR Rating.
Bottom Line
Over the past 12 months, JMIA has focused on moving advancing toward breakeven and has made significant progress. It has the potential to soar in the upcoming months despite already gaining 466.6% so far this year, based on its continued business growth, favorable earnings and revenue outlook, and strong financials.
JMIA has an impressive earnings surprise history; with the company beating consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $215.93 million for next year represents indicates 26.8% growth from this year. JMIA’s EPS is expected to grow at 14% next year. This outlook should keep JMIA’s price momentum alive in the near term.
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JMIA shares were trading at $37.86 per share on Tuesday morning, up $0.83 (+2.24%). Year-to-date, JMIA has gained 462.56%, versus a 15.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.
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