Citron Explains Change Of Heart On Jumia Technologies, $100 Price Target

Citron Research has gone from bearish to bullish on Jumia Technologies, a Berlin-based e-commerce company operating in Africa. 

The Citron Bullish Case: Citron Research flagged problems at Jumia Technologies JMIA in May 2019 that it said included financial discrepancies, fraudulent orders and company inefficiencies.

Jumia has changed its business and seen higher adoption due to the pandemic, which is helping the e-commerce company head for profitability in an emerging market, according to Citron.

“Their positioning in Africa alone (e.g., logistics, technology, employees, brand) should be worth minimum $7 billion or $100 per share,” Citron said in a new report. 

Jumia is shipping 20 million packages a year to cities and rural areas across 11 countries.

“Jumia is at the epicenter of this movement and the only scaled e-commerce player in Africa,” the report said. 

Related Link: Jumia’s Stock Surges To Close The Week After Citron Turn

E-Commerce in Emerging Markets: The Citron report highlights MercadoLibre MELI, Alibaba Group Holding BABA and Sea Limited SE as e-commerce companies in emerging markets that rewarded patient investors.

Share of MercadoLibre and Alibaba are up over 1,200% and 300%, respectively, in the last five years, the short seller said.

Sea Limited shares are up almost 500% in the last 52 weeks.

Africa has a population of 1.3 billion people, with over 520 million internet users, Citron said.

“Either these young Nigerians will be the first people on earth to not accept e-commerce or the stock is going to $100," Citron said, highlighting that 40% of the population in Nigeria is under 14. 

Payments company Stripe recently acquired a Nigerian financial company to gain entry to the country.

“There is enormous opportunity. In absolute numbers, Africa may be smaller right now than other regions, but online commerce will grow about 30% every year,” said Stripe CEO Patrick Collison, according to Citron. 

Future Partnership: Citron named Alibaba and Softbank in its report as companies that could be interested in becoming a strategic partner or investor in Jumia. 

Such an investment would provide a “direct channel for Chinese goods into the African market,” the report said.

JMIA Price Action: Shares of Jumia closed Monday's session 0.9% higher at $18.03. 

The stock is up 17% in the last five days and more than 165% year-to-date.

Disclosure: The author has a long position in shares of JMIA.

Posted In: Citron Researche-commerceNigeriaPatrick CollisonSoftbankStripeAnalyst ColorLong IdeasNewsShort SellersGlobalAnalyst RatingsTrading Ideas