Shares of African e-commerce leader Jumia Technologies (JMIA 5.38%) rallied 35% in September, according to data from S&P Global Market Intelligence.
Jumia didn't have much in the way of company-specific news in the month, as it disclosed second-quarter earnings results back in early August.
However, Jumia's management gave an interview and hosted analysts, explaining how the Trump administration's tariffs are actually benefiting the African e-commerce company. Midway through the month, a Wall Street sell-side analyst more than doubled his price target on shares, leading to a 22% increase on the same day.
As U.S. levies tariffs on China, Jumia can buy for cheaper
Early in September, Jumia CEO Francis Dufay gave an interview with Bloomberg, highlighting a number of points. Jumia has undergone a cost-cutting restructuring effort, and some of the currency volatility it experienced over the past quarters and years has calmed down. More encouragingly, Dufay noted Jumia now has better negotiating power with Chinese vendors as a result of the United States' recent tariff policies, which have raised prices to U.S. consumers.
As a result of Jumia's lower costs and better bargaining power, on Sept. 16, RBC Capital's Brad Erickson raised his price target on Jumia shares from $6.50 all the way to $15. As of Oct. 7, Jumia's stock sits just a bit below $12 per share. Erickson noted that he sees Jumia's newfound leverage with Chinese sellers enabling it to increase the "take rate" -- or the fee that it's able to charge its vendors -- by a half to full point as a percentage of revenue annually over the next few years.
The only company-specific news item during the month was Jumia announcing the launch of electric bike delivery in Uganda. The initiative is meant to replace its fossil fuel-based fleet, helping Jumia lower fuel costs and achieve its ESG goals.
Image source: Getty Images.
Jumia is a high-risk, high-reward international play
With the U.S. market trading at a significantly higher valuation than other markets around the world, international stocks like Jumia might have more upside than their U.S. counterparts.
Jumia isn't very cheap, though, especially not after last month's appreciation, trading at over 8 times sales, while the company is still losing money. However, the company is forecasting mid-teens GMV (gross merchandise volume) growth, with falling economic unit costs, and management predicts Jumia will get to breakeven by the end of 2026.
Jumia is still quite risky, but Africa has high growth potential, and profitability appears to be improving as the company grows.
