Is Jumia Technologies a Hidden Gem in E-Commerce? Despite strong year-over-year growth in GMV and revenue, Jumia Technologies (JMIA) incurred a significant loss before income tax due to currency devaluations in its largest markets, impacting purchasing power and...
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Despite strong year-over-year growth in GMV and revenue, Jumia Technologies (JMIA) incurred a significant loss before income tax due to currency devaluations in its largest markets, impacting purchasing power and supply availability. Given the challenging macro environment in Africa, should you invest in this e-commerce stock? Read more.
Headquartered in Berlin, Germany, Jumia Technologies AG (JMIA) operates an e-commerce platform in West Africa, North Africa, East and South Africa, Europe, the United Arab Emirates, and internationally. In the first-quarter results, JMIA reported a 5% year-over-year rise 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 loss before income tax from continuing operations widened by 39.6% from the prior year's quarter to $39.60 million, primarily attributed to an $11 million increase in net foreign exchange losses due to currency devaluations in Nigeria and Egypt and a rise in finance costs related to Jumia's treasury and investment portfolio management activities.
Further, Jumia reported a liquidity position of $101 million, compared to a decline of $22 million in the first quarter of 2023.
Francis Dufay, CEO of JMIA, said, "Jumia is off to a strong start to the year. Following a transformational 2023, we continued to execute against our strategic priorities focused on strengthening our core business and improving cash efficiency while establishing a leaner organization primed for growth."
"Our success is more notable when considered against the challenging macro environment in Africa. Significant currency devaluations in some of our largest markets impacted both purchasing power and supply availability, making for a difficult operating environment," Dufay added.
Shares of JMIA have gained 38.8% over the last month to close the last trading session at $12.32.
Let's look at factors that could affect JMIA's performance in the upcoming months.
Disappointing Financials
JMIA's revenue increased 18.5% year-over-year to $48.89 million for the first quarter that ended March 31, 2024. However, it reported an operating loss of $8.33 million for the quarter. Its adjusted EBITDA loss was $8 million. Also, the company's loss for the period worsened by 28% year-over-year to $40.66 million.
In addition, the company's cash and cash equivalents declined to $28.63 million as of March 31, 2024, compared to $35.48 million as of December 31, 2023. Furthermore, its total assets amounted to $159.03 million, compared to $189.94 million as of March 31, 2024.
Mixed Analyst Estimates
Analysts expect JMIA's revenue for the fiscal year (ending December 2024) to grow 8.3% year-over-year to $202.03 million. However, the company is expected to report a loss per share of $0.52 for the ongoing year.
For the fiscal year 2025, Street expects Jumia's revenue to grow 37.2% year-over-year to $277.20 million. However, the company is anticipated to incur a loss per share of $0.35 for the following year.
Decelerating Profitability
JMIA's trailing-12-month EBIT margin of negative 27.4% is unfavorably compared to the industry average of 7.78%. Likewise, its levered FCF margin of negative 29.28% is compared to the industry average of 5.42%. Its trailing-12-month EBITDA margin of negative 25.5% is compared to the industry average of 11.32%.
Further, the stock's trailing-12-month ROCE, ROTC, and ROTA of negative 118.68%, negative 33.16%, and negative 71.08% are unfavorably compared to the industry averages of 11.85%, 6.27%, and 4.23%, respectively. Also, its net income margin of negative 58.26% is compared to the industry average of 4.91%.
Elevated Valuation
In terms of forward EV/Sales, JMIA is currently trading at 5.70x, 367.3% higher than the industry average of 1.22x. Similarly, the stock's forward Price/Sales multiple of 6.17 is 578.9% higher than the industry average of 0.91. Its trailing-12-month Price/Book of 18x is significantly higher than the industry average of 2.21x.
POWR Ratings Reflect a Bleak Outlook
JMIA's weak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, equating to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. JMIA has an F grade for Value, in sync with its higher-than-industry valuation. In addition, the stock has an F grade for Stability. Its 60-month beta of 3.02 justifies its Stability grade.
Within the Internet industry, JMIA is ranked #47 out of 52 stocks.
Beyond what I have stated above, we have also given JMIA grades for Sentiment, Growth, Quality, and Momentum. Get all JMIA ratings here.
Bottom Line
Despite solid year-over-year growth in GMV and orders, JMIA reported a significant loss before income from continuing operations, primarily attributed to foreign exchange losses. The online retailer grapples with the challenging macro environment in Africa, and considerable currency devaluations in some of its major markets impacted purchasing and supply availability.
Given its deteriorating financials, stretched valuation, dim profitability, and near-term uncertainties, it seems wise to avoid investing in JMIA now.
Stocks to Consider Instead of Jumia Technologies AG (JMIA)
The odds of JMIA outperforming in the weeks and months ahead are significantly compromised. However, there are many industry peers with impressive POWR Ratings. So, consider these three stocks rated A (Strong Buy) from the Internet industry instead: Yelp Inc. (YELP), Travelzoo (TZOO), and Dingdong (Cayman) Ltd (DDL).
To explore more A and B-rated internet stocks, click here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these "death trap" stocks are lurking in your portfolio:
JMIA shares were trading at $12.90 per share on Friday morning, up $0.58 (+4.71%). Year-to-date, JMIA has gained 265.44%, versus a 16.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet's keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet's looks to help retail investors understand the underlying factors before making investment decisions.
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