African e-commerce company Jumia Technologies (NYSE:JMIA) had healthy numbers to share in its earnings report today, but the markets didn’t feel the same way. In fact, JMIA stock closed down 20% as investors reacted to a lackluster quarterly report.
Despite reporting a year-over-year revenue increase of 8.5% and more active users, investors decided to sell off the so-called “Amazon of Africa.” It seems many expected higher growth than 8.5%. It also appears Jumia is still quite a ways away from profitability.
Africa is considered an emerging market, and bulls believe that Jumia has a huge opportunity to develop its e-commerce system. With a market capitalization of $1.4 billion, roughly $600 million in cash and cash equivalents and a largely untapped African market, comparisons to Amazon (NASDAQ:AMZN) — while early — seem justified.
What Does the Market Reaction Mean for JMIA Stock?
One of the biggest constraints for the e-business is Covid-19’s burden on sub-Saharan Africa. Compared to other economies which have see their e-commerce sectors grow due to the pandemic, Jumia has suffered. In 2020, its annual sales dropped 11.35%, as other e-commerce giants like Alibaba (NYSE:BABA) saw growth.
Unfortunately, it doesn’t appear Jumia is out of the woods yet, either. Vaccination hiccups means it could be some time before the business returns to normal.
Jumia has seen some steep peaks since it went public in 2019. The company reached as high as $69 per share in February during the meme stock craze that inflated several low-priced businesses. Nine months out and quickly approaching its all-time low, the party is over, and Jumia is still cleaning up.
With that said, Jumia also presents huge potential as a high-growth operator. Trending down on the stock market doesn’t always mean turmoil. On the flip side, a boom doesn’t necessarily mean the underlying business struck gold.
Patience is the name of the game for Jumia. While its current stumble has to hurt, that doesn’t exclude it from really becoming the next Bezos-level endeavor.
On the date of publication, Shrey Dua did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
