Why did Jumia (JMIA) stock go up 30% today?

Jumia (NYSE:JMIA), an e-commerce platform provider focused on the African market, saw its shares surge on Tuesday following strong analyst support. Experts at Benchmark have initiated coverage of JMIA shares with a “buy” rating. They also predict the stock will rise to $14. That means a potential upside of more than 60% from Monday’s close.

According to Searching for Alpha report, Benchmark analysts led by Fawne Jiang said Jumia is well-positioned to capture “unmet, pent-up demand” in Africa’s e-commerce sector. Because the Berlin, Germany-based company is a leader in the continent’s e-commerce arena, it is poised to capitalize on a fundamental demographic shift. That dynamic could spark multi-year, and potentially even multi-decadal, growth.

“JMIA is a unique investment opportunity with a very attractive risk-reward ratio, strengthened by both organic value creation and long-term asset recognition,” Jiang added.

To be fair, the latest rating on JMIA stock is a bit of a mixed bag. According to TipRanks, Citi reiterated its “hold” rating — with no price target — on Aug. 15, 2023. Morgan Stanley issued a “hold” rating on Jan. 3, 2024, but raised its price target to $3.60 from $3.

However, the stock is currently trading well above that range at over $11.

A Potential Missed Opportunity for JMIA Stock

JMIA stock is up about 229% year to date. To put that performance into context, it’s important to mention the power of technology Nvidia (NASDAQ:NVDA) is up about 170% over the same period. Naturally, some investors will feel hesitant about bidding on a stock that has already moved so much.

However, the main catalyst for JMIA stock is the African e-commerce sector. Some countries on the continent are considered emerging markets, while others are becoming frontier markets. Of course, such fertile ground comes with big risks. At the same time, there are also potentially big rewards as speculators bet early on.

According to Statista, e-commerce sales in Africa could reach $34.57 billion by the end of this year. By 2029, the ecosystem could generate $56.03 billion in revenue, implying a compound annual growth rate (CAGR) of 10.14%.

But an even more compelling argument comes from the International Trade Administration, which falls under the U.S. Department of Commerce. Economists estimate that Africa will surpass 500 million e-commerce users by 2025. Even then, e-commerce penetration will be just 40%.

This framework lends credence to Benchmark’s view that JMIA stock could potentially provide multi-decade returns. Again, it’s a risky idea, but it’s likely to encourage forward-looking investors.

As of the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are the author’s own, subject to InvestorPlace.com Publication Guidelines.

On the date of publication of this article, the editor in charge did not hold (directly or indirectly) any interests in the securities referred to in this article.