Jumia Technologies (NYSE:JMIA) stock came public in 2019 and has since been called the Amazon (NASDAQ:AMZN) of Africa.
It’s not Amazon. It’s also not African.
I called it the Alibaba Group Holding (NASDAQ:BABA) of Africa when it came public at $14.50 per share and it’s not that either. If you bought that IPO, however, you’re still in profit. JMIA stock trades for more than $19.
But most who have followed the steady drumbeat of stories, here and elsewhere, telling you to buy its dips have come out poorer for it.
Here’s why.
Africa is Big
Just saying “the Amazon of Africa” is a misnomer.
If there is an Amazon of Africa, it’s Amazon. Amazon has had an African headquarters in Cape Town since last year. It has two data centers there. The company hopes to create 19,000 jobs, starting in the continent’s most-developed economy.
Jumia is basically a delivery service. It wants to serve the whole continent, but has had to pull back from countries where it was losing money.
Much of what you can learn online about Jumia is out of date. This Fast Company article says it operates in Tanzania. It pulled out of that country in 2019. The reason it gave was the lack of a solid middle class.
Jumia was launched in Nigeria and, if you can get through the captcha to its Nigerian site, it has the look-and-feel of a large merchant. But its services are presently limited to 11 countries and, in many of them, it’s offering simple payment and logistics services.
Alibaba is much bigger in Africa than Jumia or Amazon. It used the pandemic to become deeply embedded in African trade networks. It’s doing the kinds of things Jumia only promised to do. That’s because it has the sourcing and logistics needed to serve most countries in the continent, which Jumia lacks.
Jumia is German
Jumia isn’t an African company at all. It was incorporated in Germany, is run from Dubai, and keeps its technology hub in Portugal.
It’s also not a large company. Revenue for the first two quarters of 2021 came to $79 million. For all of 2020 it was $159 million. Despite this the company’s market cap remains about $1.9 billion.
Jumia rides on African pride, but even in 2020 it was clear that not all was as it seemed. There was fraud discovered within the company two years ago.
Despite all this, Jumia stock had a moment late last year, which continued into February. If you bought it a year ago and sold at that February peak, when it traded as high as $75, you made money. Looking at the stock chart it was easy to say, well it was at $70, but $20 looks like an overreaction. It’s realism.
The Bottom Line on JMIA Stock
Before you buy any company’s stock, especially one operating on another continent, know what you’re getting.
Africa remains in the throes of the pandemic. Most citizens remain unvaccinated. The sub-Saharan economy is growing at only 3.3% per year, and contracted in 2020. The continent’s entire gross domestic product is under $2.7 billion.
Africa does hold great promise. But our research staff was right in February, telling investors to be cautious. What Africans call the middle class would be called poverty in North America.
Right now, Jumia is being realistic. It’s trying to grow its operations in Nigeria and expand from there, as it develops its logistics and payment businesses. JMIA stock is not going to suddenly double or triple. Africa isn’t ready for its own Amazon.
On the date of publication, Dana Blankenhorn held long positions in AMZN and BABA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Living With Moore’s Law: Past, Present and Future available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets, and politics.
