What happened
Following the company's earnings report this morning, shares of Jumia Technologies (JMIA -2.22%) initially dove as much as 23% before recovering those losses to finish up 7.6%.
The movements tracked with a larger trend in tech stocks, showing investors pouncing on discount prices after a sell-off yesterday and this morning. The price swing also indicates that investors don't know what to think of the African e-commerce company's latest earnings report.
Image source: Jumia.
So what
Gross merchandise volume (GMV) fell 13% in the quarter, or 5.1% in constant currency, to 165 million euros, as the company pivots to a marketplace model and to selling lower-priced, higher-frequency items. Total payment volume rose 21% to 42.9 million euros, a sign its payment platform continues to gain adoption.
Revenue in the quarter was down 6.9% to 27.4 million euros, reflecting the strategic shift, but gross profit, the metric the company is trying to maximize, rose 11% to $20.4 million euros. There were other signs that profitability was moving in the right direction as gross profit after fulfillment expense rose from 2.5 million to 6.2 million euros, and it narrowed its adjusted EBITDA loss by 24% to 27 million euros.
Co-CEOs Jeremy Hodara and Sacha Poignonnec said, "Our first quarter results reflect solid progress toward profitability. The drivers remain consistent: selective and disciplined usage growth, gradual monetization and continued cost discipline."
Now what
Jumia gets little coverage on Wall Street, and the stock is unique on the market as an African e-commerce company. Jumia has a huge opportunity in front of it as the leader in online retail in Africa, but the continent lacks much of the infrastructure of other parts of the world, including even basics like street addresses. Jumia is thought of and valued as a growth stock, even though its revenue and GMV is currently shrinking, a reflection of the shift in the company's business model and its struggles to gain significant traction in a difficult environment.
Given the opportunity, Jumia offers both high risk and high potential reward, and shares have been extraordinarily volatile since its 2019 IPO. The investor response to today's report indicates that the numbers weren't easy to parse, as there are some signs that the company is moving in the right direction though it's still dealing with sluggish growth or even declines in key areas.
Still, given Jumia's upside potential, a certain set of investors is likely to grab the stock if the price falls low enough, and that seems to be what happened today.
