Jumia Stock Is an Investment in Africa’s ‘Vast Untapped Potential’

After a slow start to 2020, shares in Jumia Technologies AG – ADR (NYSE:JMIA) ended the year as a top performer. After opening 2020 under $7, JMIA stock closed out the year at $40.35, for a 482% gain.

Jumia (JMIA) banner at the New York Stock Exchange
Source: Christopher Penler / Shutterstock.com

The rapid growth continued into the new year and with its latest close of $64.18, shares are up 59% so far in 2021. Few people have heard of this African e-commerce platform, but clearly something is clicking — including online shoppers.

Jumia Technologies made the list of “A-rated Growth Stocks to Buy For Today and Tomorrow.” Here’s why you might want to take a closer look at JMIA stock for your own portfolio.

What Does the Company Do?

Before delving deeper on the opportunity offered by JMIA, it wouldn’t hurt to have a high level look at what this company does. 

Launched in 2012 (and listed on the New York Stock Exchange since April 2019) Jumia Technologies is a collection of web-based services that target pan-African customers. This is a market that has largely been ignored by western e-commerce and online service companies. Jumia Technologies encompasses a wide range of services including e-commerce, hotel booking, food delivery and online payments.

The company currently claims over 110,000 active sellers on its e-commerce platform. 

Vast Potential Market

Western tech companies have traditionally been focused on the North American and European markets. Their primary targets for growth have been China (population 1.398 billion) and India (population 1.366 billion). The pan-African market is on the same scale as these, with 1.2 billion consumers. That’s roughly double the size of the North American market. However, with limited infrastructure, low incomes, and political instability, the big tech companies have largely stayed away.

That’s left a big opening and a huge underserved market. One that Jumia Technologies is taking full advantage of. And huge opportunity for ongoing growth remains. A report released in December 2020 by the International Trade Centre reported that that African online marketplaces saw 2.17 billion visits in 2019, concluding “consumer traffic on online marketplaces in Africa still has vast untapped potential.”

A 2018 McKinsey report highlighted the rapid adoption of technology by African consumers. The continent is the fastest-urbanizing region in the world. McKinsey called Africa “one of the 21 century’s great growth opportunities.”

There are big challenges to overcome in the pan-African market, including limited internet access and a challenging environment for delivery. However, progress is being made and Africa’s consumer class is rapidly growing. The United Nations notes that while worldwide, the number of online shoppers has been growing at a rate of 6% per year on the African continent that rate has been 18% annual growth since 2014.

One advantage that an e-commerce company like Jumia Technologies enjoys over others operating in western markets is a lack of retail stores. Many of Africa’s online shoppers don’t have access to brick and mortar retail stores offering the same goods, reducing the friction to adopting online shopping. 

JMIA Is a Growth Stock

Jumia Technologies has been helping to fuel that growth in online shopping, and the results are beginning to be felt in the growth of JMIA stock. Given the timing of the rapid increase in JMIA share value, you might suspect that it’s experiencing the effect that many e-commerce stocks have felt from the Covid-19 pandemic. 

However, the company feels that’s not the case. In its latest earnings report — which helped to spark the current run on JMIA — the company’s gross profit was up 22% year-over-year, operating loss was down 49% and transaction volume through its JumiaPay was up 50% YoY. Declaring Jumia Technologies well on a path to profitability, the company’s co-CEO’s told investors:

The significant progress achieved was mostly attributable to the thorough work we have done on the fundamentals of our business, with limited support from external factors such as COVID-19.

Bottom Line on JMIA Stock

If you’re looking for a growth stock, Jumia Technologies has put on quite a show over the past three months. What makes it attractive is that this is an e-commerce platform that’s had exceptional performance — but that’s not primarily attributable to the pandemic.

Instead, JMIA stock is taking off as it becomes clear that Jumia Technologies is solidifying its position as the e-commerce platform of choice for the pan-African market. A market with 1.2 billion people that is just beginning to enter its rapid growth phase.  

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

Article printed from InvestorPlace Media, https://investorplace.com/2021/02/jmia-stock-is-an-investment-in-africas-vast-untapped-potential/.

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