RBC Discusses Jumia's Outlook

Jumia Technologies AG - ADR JMIA is an e-commerce platform that operates in six African regions and 14 countries that combine for a GDP of two trillion euros. After gaining more than 200 percent since its initial public offering, the stock's valuation is now "relatively full," according to RBC.

The Analyst

RBC Capital's Mark Mahaney initiated coverage of Jumia Technologies with a Sector Perform rating and $40 price target.

The Thesis

Jumia has six positive investment attributes, Mahaney wrote in the note, including:

1. Exposure to a large market highlighted by 350 million internet users and $1.1 trillion in consumer spend;
2. A total addressable market that benefits from GDP growth, a growing middle class and growing urbanization;
3. The company boasts the most downloaded e-commerce app in a few key countries;
4. The potential to become profitable from growing scale and improving leverage;
5. New revenue opportunities from growing monetization initiatives; and
6. Customers are showing improving repeat purchase rates, frequency and total spend.

On the other hand, six key risks include:

1. Foreign exchange risks, political instability, violence and terrorism;
2. The company will likely be unprofitable until 2023;
3. Potential for higher than expected delivery costs to areas with poor infrastructure;
4. Multiple macro risks including high inflation;
5. Competition from Souq, Takealot and Konga; and
6. Management has minimal experience managing a public company.

Price Action

Jumia Technologies traded around $37.85 per share in Monday's session.

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