What happened

Monday was not a good day to be an investor of African e-commerce specialist Jumia Technologies (NYSE:JMIA). In the wake of a disappointing earnings report published earlier this month, one analyst at a prominent investment bank has become more bearish on the stock; his analysis helped push Jumia's share price down by almost 10% on the day.

So what

Analyst Luke Holbrook has taken over coverage of Jumia stock for Morgan Stanley, and he wasted little time downshifting the investment bank's recommendation. In his estimation, the stock is underweight, and investors should sell their shares at a price target of $11 per share. Previously, Morgan Stanley's recommendation was equal weight (neutral).

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Holbrook is concerned about Jumia's 2019 pivot away from relatively profitable tech goods to lower-margin -- if higher-volume -- products. This move, combined with high spending on marketing and technology, is negatively affecting the company's overall non-GAAP (adjusted) earnings before interest, taxes, depreciation, and amortization (EBITDA) margins.

The prognosticator also pointed to the company's thin growth in gross merchandise value (GMV), a key metric in the e-commerce world, as a current worry.

Holbrook's new take on Jumia comes less than two weeks after the company released its third-quarter results, which were not exactly met with glee by investors. The figures revealed that GMV, active customer count, and revenue all rose by around the 8% mark on a year-over-year basis. That closely watched EBITDA number was again negative, almost doubling from the year-ago quarter to over $52 million.

Now what

Other e-commerce companies throughout the world are delivering significantly higher growth numbers while landing squarely in the black. Jumia isn't exactly a new business, so perhaps investors are unwilling to accept single-digit improvements and/or the lack of profitability at this stage.

But they shouldn't necessarily dismiss the company. According to Holbrook, the massive African e-commerce market is only 1% to 2% penetrated and as such, offers vast opportunity to early movers like Jumia. Also, it's still fairly early days for the company's pivot, and it could well succeed in the coming years.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.