Jumia (NYSE:JMIA), which operates an e-commerce platform in Africa, conducted its IPO (Initial Public Offering) in April 2019. On its first day of trading, the shares soared by 75%. But since then, things have not been so bullish for the stock’s owners. Keep in mind that Jumia stock is up only 12% since its offering.
But then again, since March, Jumia stock has gone from $2.68 to $18.65.
In other words, this stock is really for those who have strong stomachs. While Africa has huge potential, the market for e-commerce and mobile payments is still in the nascent stages there.
So is the stock worth considering right now? Or should investors wait before buying it? Before I divulge my opinion, let’s take a look at the company’s background.
Back in 2012, Jeremy Hodara and Sacha Poignonnec founded the company and became its co-CEOs. Before that, Hodara was an engagement manager at McKinsey and specialized in ecommerce. As for Poignonnec, he was a partner at McKinsey and focused on packaged goods and the retail sector.
The co-founders launched the firm, then called Kaymu, in Nigeria and Pakistan. They were able to secure a small round of seed funding from Rocket Internet, a major company based in Europe.
The company expanded quickly, as it established operations across a variety of countries like Egypt, Kenya, Ivory Coast, South Africa, Tunisia, Algeria and so on. Here are some of the metrics about the current size of the business:
- 40 million product listings, with brands like Intel (NASDAQ:INTC), Coca-Cola (NYSE:KO), HP (NYSE:HP) and Procter & Gamble (NYSE:PG)
- 1 million active customers
- 110,000 active sellers
- Gross merchandise value of $1.1 billion
At the core of Jumia is a set of online marketplaces that cater to different countries. Its product lines are diverse, including consumer electronics, apparel, beauty items and consumer packaged goods. It even gives consumers access to services like home deliveries and travel bookings.
Jumia has other businesses. Among them are Logistics, which includes a network of warehouses, and JumiaPay, a mobile-payments service.
No doubt, the company’s market opportunity is large – and Jumia has the advantage of being a first mover. Note that the population of Africa is 1.38 billion, and there are roughly 17 million small-and-medium-size businesses on the continent. It also has 523 million internet users and $4 trillion of household and B2B spending.
The Bottom Line on Jumia Stock
Jumia is certainly facing some risks. In fact, the company has been a popular target of short sellers, such as Citron Research. Consider that last year the latter firm accused Jumia of fraud! But interestingly enough, Citron has recently changed its tune, and it now has a price target of $50 on the name.
Another issue is that its financial results have been far from robust. The company keeps losing money, and its revenues have been choppy. Thus, it may need to raise more capital.
Yet Jumia has been taking actions to restructure its operations. For example, it has closed down its businesses in countries like Cameroon, Rwanda and Tanzania. It has also undertaken cost-cutting efforts, which have even included cuts in the salaries of its founders, as well as changes to its pricing strategies.
And in terms of growth, the company’s JumiaPay service may be its most important driver. During its latest reported quarter, its total payments volume jumped 106% year-over-year to €53.6 million. Note that payment businesses generally carry high margins.
Jumia stock is still a speculative name. But for those investors who have a high risk tolerance and are willing to take a long-term view of things, it does look interesting.
On the date of publication, Tom Taulli did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Tom Taulli (@ttaulli) is an advisor/board member for startups and author of various books and online courses about technology, including Artificial Intelligence Basics, The Robotic Process Automation Handbook and Learn Python Super Fast. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s.