One of this year's hottest IPOs is crashing down. Jumia (JMIA 5.58%) -- the leading online marketplace operator in Africa with a presence in 14 different countries in the continent -- more than tripled days after going public at $14.50 last month. The stock has now surrendered nearly half of its peak value.

Jumia stock has moved lower in eight of the past nine trading days. The only day it ticked higher in that sharp sell-off, surprisingly enough, was Monday, when the general market was suffering its biggest decline in more than four months. Jumia clearly marches to the beat of its own drum, but the method to the madness here is that investors were pleased with Jumia's first-quarter report as a public company on Monday. 

A Jumia warehouse in Morocco.

Image source: Jumia.

The MercadoLibre connection

If e-commerce in a basket of emerging markets sounds like a gold mine, you may be thinking about MercadoLibre (MELI 0.87%), the fast-growing online marketplace operator that dominates through Latin America. Both companies have taken advantage of their pole positions in their respective territories to launch successful payment and logistics platform. They are also both growing at healthy speeds.

Revenue soared 39% at Jumia last year, more than double MercadoLibre's 18% top-line gain on a dollar-translated basis. However, most of the advantages beyond that belong to MercadoLibre.

Jumia is still tiny, closing out 2018 with 81,000 active sellers and 4 million active buyers. MeracdoLibre had more than 10 million unique sellers in 2018 selling to 37.4 million unique buyers. The $948.8 million in gross merchandise volume at Jumia in 2018 is dwarfed by the $12.5 billion in transactions through MercadoLibre. There may be 1.2 billion people in Africa, but less than 1% of the continent's sales are taking place online. 

MercadoLibre doesn't have a cakewalk in Latin America. It has to deal with ridiculous inflation in some countries, and the governments aren't always the poster children for political stability. Jumia still has a more challenging operating climate. Vague addresses introduce guesswork into the logistics equation, and a lot of people in Africa don't trust the internet and won't pay until they have the product. Jumia has had to settle for cash on delivery as the preferred payment method for its shoppers. It has had to build out a network of leased warehouses to offer sellers and customers places to drop off and pick up merchandise. 

Jumia's report on Monday showed revenue growth slowing to a mere 12% in the first quarter, but it's the handiwork of third-party sales -- where Jumia records just the commissions and other fees it collects -- growing at the expense of a tactical retreat in first-party sales. Gross merchandise volume is the better gauge of Jumia's growing popularity, and that metric soared 58% higher for the period. 

Investors will still need to tread carefully here. Jumia is growing, but it will take a lot of time before it goes mainstream in a continent where trust in e-commerce and the infrastructure to support it are still early in the evolutionary process. Africa will get there -- just as MercadoLibre's Latin America did -- but it will take a lot longer than today's hungry bulls believe. Though Jumia is worth watching, it hasn't earned the same dot-com and market darling status that MercadoLibre has garnered over the years.