Jumia (NASDAQ:JMIA) stock tanked in early November on back-to-back negative catalysts that ultimately led to Jumia stock losing more than 30% of its value in just two trading days.

First, on Monday, Pfizer (NYSE:PFE) announced that its Covid-19 vaccine candidate was proving to be 90% effective — far better than the 50% to 70% efficacy most were expecting — and that mass distribution of this highly effective vaccine could happen as soon as mid-2021.

Of course, this development sets the stage for rapid global economic normalization over the next 12 months, which means less online shopping and is therefore a negative development for e-commerce stocks like Jumia.

JMIA stock tumbled 16% on that news.

Then, on Tuesday, Jumia reported wobbly third-quarter numbers which included a huge year-over-year drop in platform gross merchandise value (or GMV). Investors ran for the hills. JMIA stock tanked another 20% on that news.

Net net, the African e-commerce giant has seen its stock price plunge more than 30% in just two days.

That’s the bad news.

The good news is that this huge cliff dive in JMIA stock looks like a compelling buying opportunity into a stock which could soar more than 10X over the next few years.

Here’s why.

Jumia Stock: Earnings Not as Bad as They Appear

Ostensibly, Jumia’s third-quarter earnings report was horrendous.

Gross merchandise value dropped 28% year-over-year — the biggest GMV decline Jumia has reported since going public back in 2018. Revenues fell 18% year-over-year. The number of active customers on Jumia’s e-commerce platform actually fell from the second quarter. Pretty much all the headline numbers missed expectations.

But, upon closer examination, the report wasn’t that bad. Actually, it was pretty good.

The big drop in GMV is due to a shift in product mix from selling higher-value phones and electronics, to selling lower-value everyday goods. This shift, while dragging on GMV, is actually a good shift to make, because it turns Jumia into a pan-product e-commerce platform with much broader appeal and reach.

Meanwhile, active customers dropped sequentially because of Covid-19 noise. That is, African countries largely didn’t take Covid-19 as seriously as the rest of the world, and were only in full/partial lockdown for a few months in Q2. By the third quarter, most African countries have lifted lockdowns, and simply implemented minor mobility restrictions. Against that backdrop, Jumia saw its customer base unsurprisingly decline from Q2.

Backing out this Covid-19 noise, Jumia’s customer base grew by more than 20% year-over-year — illustrating that Jumia continues to expand its reach among an emerging class of digital shoppers in Africa.

Concurrently, Jumia’s payment business — JumiaPay — continues to scale nicely, growing total payment volume by 50% in the quarter. Now, roughly a quarter of all Jumia transactions are done through JumiaPay.

Big picture: Jumia missed the mark in its Q3 earnings report. But those misses were driven by ephemeral Covid-19 headwinds. The underlying fundamental trends of wider product assortment and more engaged customers on the platform remain healthily in-tact.

Profitability Improving

Most importantly, Jumia’s third-quarter earnings report underscored that the company is taking enormous steps towards sustained profitability.

For years, Jumia — like many emerging hypergrowth companies — spent big to grow big. This led to enormous revenue growth alongside huge losses. But, as revenue growth trends started to moderate in 2019, Jumia’s losses dramatically widened, and management was forced to re-think its “spend big, grow big” strategy.

In 2020, they’ve done so with tremendous success.

Gross margins in the third quarter improved more than 500 basis points year-over-year on the back of a more favorable product mix and supply chain enhancements. Fulfillment dollars dropped 20% year-over-year as the company improved and streamlined its logistics. Ad spending dropped 55% as management leaned into data-driven advertising to maximize the spend of each ad dollar. G&A spending dropped 24% on the back of overhead rationalization.

Net net, because of these enormous cost cuts, Jumia turned a 28% drop in GMV, into 22% gross profit growth and a $23 million year-over-year improvement in adjusted EBITDA.

That’s impressive.

It largely means that Jumia has fixed its profitability profile, so that all this company needs to do to generate enormous profits over the next few years is throw some gasoline on the Africa e-commerce growth narrative.

Fortunately, 5G is going to do that for them.

Botched the Covid-19 Tailwind? Not Really

A lot of investors look at Jumia’s 28% GMV drop in Q3 and simply ask, “How? How on Earth does an e-commerce platform report a 28% drop in GMV amid the Covid-19 pandemic?”

The answer is simple: Because Africa didn’t really take Covid-19 that seriously.

Nationwide lockdowns were only put in place in Africa in four countries. Of those four countries, most of their lockdowns ended in May. Meanwhile, for everyone else, partial curfews and some mobility restrictions were the norm throughout the pandemic.

In other words, while Covid-19 fear and government-mandated lockdowns created an e-commerce surge in most developed countries, that didn’t really happen in Africa to the extent it happened in the U.S. or throughout Europe.

And that’s totally OK for JMIA stock, because Covid-19 isn’t the big driver of Africa’s leap into the e-commerce era — 5G is.

5G (not Covid-19) Is the Big Upside Catalyst

With 5G, you don’t need big fiber optic cables; you only need a few base stations to make it work. With base stations, high-speed mobile internet connectivity is beamed to everyone across the globe … which means that 5G is highly scalable, flexible and affordable in ways that mobile-based internet infrastructure has typically not been.

In Africa, that is a game-changer. Fixed internet infrastructure is scarce, and the resources needed to connect everyone to wired internet are scarcely found. As Africa boards the 5G bandwagon, African telecom companies are able to connect everyone to high-speed internet through dirt-cheap wireless connections.

Look to telecommunications company MTN Group, which has already deployed superfast 5G mobile internet in Nigeria. Safaricom’s 5G mobile internet service is scheduled to launch in Kenya this year. Meanwhile, Vodacom (OTCMKTS:VDMCY) launched its 5G network in Lesotho, and myriad other companies are running South African 5G trials.

As more companies and countries join in on the 5G revolution over the next few years, Africa will find itself in the modern era of ubiquitous high-speed internet connectivity. This will cause Africa’s e-commerce market to boom.

The company in the center of this boom? Jumia. Which implies big future growth prospects for JMIA stock.

Bottom Line on Jumia Stock

I get it. Jumia stock completely missed the mark with its third-quarter earnings report. It looks like the growth narrative is falling off the rails. JMIA stock is plunging.

Broadly, the situation is ugly.

But it won’t remain ugly for long.

Underneath the hood, Jumia is doing everything right to situate itself for huge growth once 5G proliferates across Africa and leapfrogs the continent into the modern era of digital shopping.

As that happens, I think JMIA stock could turn into a 10X winner over the next few years.

So, if time is on your side, I’d consider buying the dip in JMIA stock today.