Is Jumia Technologies a hidden gem in e-commerce?

Headquartered in Berlin, Germany, Jumia Technologies AG (JMIA) operates an e-commerce platform in West, North, East and South Africa, Europe, the United Arab Emirates and internationally. In its first-quarter results, JMIA reported a 5% year-over-year increase in gross merchandise volume (GMV) to $181.50 million and a 19% increase in revenue to $48.90 million.

Despite this, the online retailer’s pre-tax loss from continuing operations increased by 39.6% compared to the same quarter last year to $39.60 million. This was primarily due to an $11 million increase in net foreign exchange losses due to currency devaluations in Nigeria and Egypt and an increase in finance costs related to Jumia’s investment and treasury portfolio management business.

Additionally, Jumia reported liquidity of $101 million, compared to a decrease of $22 million in Q1 2023.

Francis Dufay, CEO of JMIA, said: “Jumia is off to a strong start to the year. After a transformational 2023, we continued to execute on our strategic priorities, focusing on strengthening our core business and improving cash efficiency, while creating a leaner organization poised for growth.”

“Our success is further highlighted by the challenging macroeconomic environment in Africa. Significant currency devaluations in some of our largest markets have impacted both purchasing power and supply availability, resulting in a challenging operating environment,” Dufay added.

JMIA shares have gained 38.8% over the past month and closed the last session at $12.32.

Let’s take a look at the factors that could impact JMIA’s performance in the coming months.

Disappointing financial results

JMIA’s revenue increased 18.5% year-over-year to $48.89 million in the first quarter ended March 31, 2024. However, the company reported an operating loss of $8.33 million for the quarter. Adjusted EBITDA loss was $8 million. Additionally, the company’s loss for the period worsened 28% year-over-year to $40.66 million.

Additionally, the company’s cash and cash equivalents decreased to $28.63 million as of March 31, 2024, compared to $35.48 million as of December 31, 2023. In addition, its total assets were $159.03 million, compared to $189.94 million as of March 31, 2024.

Analysts’ estimates mixed

Analysts expect JMIA’s revenue for the fiscal year (ending December 2024) to rise 8.3% year over year to $202.03 million. However, the company is expected to post a loss per share of $0.52 for the current year.

For fiscal 2025, the Street expects Jumia’s revenue to grow 37.2% year over year to $277.20 million. However, the company is forecast to post a loss per share of $0.35 in the following year.

Declining profitability

JMIA’s trailing-12-month EBIT margin of 27.4% compares unfavorably to the industry average of 7.78%. Similarly, its leveraged FCF margin of 29.28% compares to the industry average of 5.42%. Its trailing-12-month EBITDA margin of 25.5% compares to the industry average of 11.32%.

In addition, the stock’s 12-month ROCE, ROTC, and ROTA of minus 118.68%, minus 33.16%, and minus 71.08% compare unfavorably to the industry averages of 11.85%, 6.27%, and 4.23%, respectively. Furthermore, the net income margin of minus 58.26% compares favorably to the industry average of 4.91%.

Increased valuation

In terms of forward EV/Sales, JMIA is currently trading at 5.70x, which is 367.3% higher than the industry average of 1.22x. Similarly, the stock’s forward Price/Sales of 6.17 is 578.9% higher than the industry average of 0.91. Its 12-month forward Price/Book of 18x is significantly higher than the industry average of 2.21x.

POWR Ratings Reflect a Dire Outlook

JMIA’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall rating of D, which equates to Sell in our proprietary rating system. POWR Ratings are calculated based on 118 separate factors, with each factor weighted to its optimal degree.

Our proprietary rating system also evaluates each stock based on eight separate categories. JMIA has an F for Value, consistent with a higher than industry valuation. Additionally, the stock has an F for Stability. Its 60-month beta of 3.02 supports the Stability rating.

In the Internet sector, JMIA was ranked 47th out of 52 stocks.

In addition to what I said above, we also gave JMIA ratings for Sentiment, Growth, Quality, and Momentum. You can find all of the JMIA ratings here.

Summary

Despite solid year-over-year growth in GMV and orders, JMIA posted a significant loss before income from continuing operations, primarily due to currency losses. The online retailer is struggling with a challenging macroeconomic environment in Africa, with significant currency devaluations in some of its major markets impacting purchase and delivery availability.

Given its deteriorating financial situation, high valuation, weak profitability and near-term uncertainty, investing in JMIA seems prudent at this time.

Actions to consider instead Jumia Technologies AG (JMIA)

The chances of JMIA outperforming in the coming weeks and months are very limited. However, there are many competitors in the industry with impressive POWR ratings. Therefore, consider these three A-rated (Strong Buy) stocks in the Internet industry: Yelp Inc. (YELP), Travelzoo (TZOO), and Dingdong (Cayman) Ltd (DDL).

For more A and B rated internet stocks, click here.

What to do next?

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JMIA stock was trading at $12.90 per share on Friday morning, up $0.58 (+4.71%). Year to date, JMIA has gained 265.44%, compared with a 16.71% gain for the benchmark S&P 500 during the same period.

About the Author: Mangeet Kaur Bouns

Her keen interest in the stock market led Mangeet to become an investment researcher and financial journalist. Using her fundamental approach to stock analysis, Mangeet aims to help retail investors understand the underlying factors before making investment decisions. More…

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