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Why Jumia Technologies Stock Plunged This Week

By Jeremy Bowman – Nov 18, 2021 at 6:14PM

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The African e-commerce stock plunged on a weak earnings report.

What happened

Shares of Jumia Technologies (JMIA 5.42%) took a dive this week after the African e-commerce company reported disappointing third-quarter results.

According to data from S&P Global Market Intelligence, the stock was down 26.4% as of Thursday's closing.

A Jumia delivery driver on a motorbike.

Image source: Jumia.

So what

Jumia has been a highly volatile stock since its IPO in 2019. The company holds a lot of promise as one of the leading e-commerce companies in Africa, but its financial numbers show a company struggling to grow and with no visible path to profitability.

The stock fell 19% on Tuesday after Jumia released poor results and continued to slide over the next two days. 

Gross merchandise volume grew just 8% in the quarter to $238.1 million, and revenue was up just 8.5% to $42.7 million. The company is in the midst of a transition to lower-priced, higher-frequency products as orders increased 28% to 8.5 million. Total payment volume increased 15% to $64.5 million, showing its digital payment product, Jumia Pay, is gaining some traction. Jumia Pay transactions were up 34% to 3 million. 

Its annual active customer count also grew by just 8% to 7.3 million, which is not enough to excite growth stock investors. 

Jumia also continues to be deeply unprofitable, with its adjusted EBITDA loss nearly doubling to $52.5 million, partly because its sales and advertising expense more than tripled in the quarter to $24 million. Gross profit also declined from $27.1 million to $25.5 million, another sign the business is heading in the wrong direction.

Co-CEO Sacha Poignonnec said: "Our growth acceleration strategy initiated at the end of the second quarter of 2021 is starting to pay off. We are making investments in sales and advertising and technology to further enhance consumer education, brand consideration as well as the relevance and convenience of our platform."

Now what

Jumia didn't offer specific guidance, but said that it intended to increase investments in sales and advertising, technology, and employee expenses.

Jumia was the rare e-commerce company not to benefit from the pandemic, even though the stock surged earlier this year alongside dozens of growth stocks that have since faded.

The company operates in several African countries but doesn't appear to have reached a critical mass in any of them. With just 8% top-line growth, there's little reason to be encouraged by the results even if the potential opportunity in front of the company is sizable.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Jumia Technologies AG-ADR. The Motley Fool has a disclosure policy.

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