Often touted as the “Amazon of Africa,” Jumia Technologies AG (NYSE: JMIA) is a pan-African e-commerce platform. Headquartered in the Nigerian capital of Lagos, the company has been operating since 2013 and made an initial public offering (IPO) debut in 2019.
The company’s marketplace connects sellers with consumers while integrating payment and logistics solutions as well. Besides different income streams, the most significant driver behind the stock is the growth potential, as the African market (1.2 billion consumers) has not fully adopted e-commerce.
JMIA Stock Price
JMIA made a public debut in 2019 but quickly declined after accusations of accounting fraud by Citron Research.
After a prolonged decline, about a year ago JMIA shares surged almost 800%. The increase is mainly attributed to retail speculators who made it a personal crusade to punish short-sellers. Interestingly, JMIA was one of the earliest short squeezes and a predecessor to the most popular ones — GameStop (NYSE: GME) and AMC Entertainment (NYSE: AMC).
JMIA stock’s behavior follows the pattern of periods of high volatility (usually upwards) followed by prolonged declines.
JMIA Stock Forecast
Forecasting the price for a high-growth stock that did an IPO within the last 5 years is challenging. Yet, here are some of the critical factors to consider.
- The company is currently unprofitable and is not on track to become profitable within the next 3 years.
- The future growth forecast is high (26.5%) but it is lagging the industry (29.6%).
- The company has no debt.
- There is a risk of dilution because shares outstanding grew by 23.7% in the previous year.
- Institutional ownership is not significant, so the stock is less stable.
A graphical representation of revenues and earnings shows the situation best, as it is evident that the trend is too flat to be overly optimistic.
Jumia Technologies, Earnings and Revenue History; Source: Simply Wall St
JMIA Stock News
Although the underlying trend is optimistic, the latest earnings report disappointed, showing that business on the African continent continues to struggle as a result of the pandemic.
Although the company remains unprofitable, it is not unsafe given that it holds zero debt and over $600 million in cash. Considering a trailing cash burn of $126 million, the company has at least 5 years of cash runway.
Furthermore, the company recently posted an insider transaction, as co-CEO Jeremy Hodara bought 50,000 shares worth almost $1 million. It is a positive sign as it shows optimism from company executives.
However, short interest remains elevated. Many market participants are betting on the further stock decline, as the short percent of float currently stands at 13.89%.
How to Buy Jumia Technologies Stock
Follow these 4 steps to get started.
Step 1: Pick a brokerage.
The easiest and the most convenient way to buy a stock is through a brokerage — a regulated intermediary between you (the investor) and the stock market. Nowadays, the technology allows you to buy and sell stocks through web platforms or even your phone in just a few seconds.
If you are a first-time investor, check out Benzinga’s broker comparison table below.
- Best For:Active and Global TradersSecurely through Interactive Brokers’ website
- Best For:Traders of All Levelssecurely through Moomoo's website
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- Best For:Intermediate Traders and Investorssecurely through Webull's app
Step 2: Decide how many shares you want.
The number of shares to buy depends on share price, portfolio size and risk management strategy. As JMIA currently trades around $19, there is no need to prioritize a broker that offers fractional share ownership. Yet, that feature might come in handy if you plan to invest in stocks with high share prices like, for example, Tesla (NASDAQ: TSLA), which trades around $800.
Step 3: Choose your order type.
You can use different ways to instruct your broker on how to buy shares. It is necessary to understand the basics before investing. You should practice on the broker’s demo platform before executing the first live trade.
- Market order: This order instructs your broker to buy or sell shares immediately, regardless of price. It is the fastest way, but you might get a slightly worse entry price.
- Limit order: This order will work only at a certain level or better. For example, if the JMIA price is $19.50 and you put in a limit order at $18, it will execute only if the price falls and reaches that level. This type of order is perfect for dealing with smaller cap stocks where liquidity can be an issue.
- Bid: This is the greatest price a buyer is willing to pay at the moment.
- Ask: This is the smallest price at which the seller is selling at the moment.
- Spread: This is the difference between the bid and the ask. For example, if the bid for JMIA is $19.20, and the ask is $19.25, then the spread is $0.05. A narrow spread is a sign of good liquidity in the market.
Step 4: Execute your trade.
After you have selected and executed the trade, the broker processes the order for you. You officially own the shares only after the order has been filled, so keep an eye on broker confirmations and statements.
JMIA on Benzinga Pro
JMIA Stock Chart, Source: Benzinga Pro
After the latest upwards move at the beginning of the year, the stock has been steadily declining. From April through July, the stock repeatedly rejected from the $30 level, broke the $20 support, failed to reclaim it and now continues to go lower — likely to test the next support at $16. The price also remains below both of the popular moving averages — 50-day and 200-day.
This trend is somewhat bearish from a technical standpoint since the chart shows repeated lower lows and lower highs. In that scenario, blind buying is often called “catching a falling knife” — a risky activity that might work but might injure you as well.
To conclude, it is hard to take a positive stance unless the stock decisively closes above the $20 level and the 50-day moving average.
Great for Traders, Risky for Investors
It is no secret that volatility is a trader’s best friend. To profit, traders need prices to move, which attracts them to highly speculative opportunities that stocks like JMIA provide.
On the other hand, long-term investors generally look for either value or growth. Although classified as a growth stock, JMIA has been somewhat sluggish.
Overall, this situational opportunity is great for short-term speculators who are monitoring options activity, looking for the next short-squeeze opportunity. Long-term investors should search for better opportunities.
Frequently Asked Questions
How does Jumia make its money?
Jumia operates an e-commerce marketplace, focusing on the African continent — one of the regions that is lagging in e-commerce adaptation and thus represents a promising growth story.
As an e-commerce platform, Jumia generates revenue through sales, either first-party or third-party.
Although first-party sales used to generate a lot of revenue, the company has been shifting the focus to third-party sales, with the majority of revenue in 2020 coming from commissions and fulfillment fees. The company collects commissions on every sale, while sellers who use Jumia’s logistic network also pay fulfillment fees. Finally, the company also earns by selling advertising space on the platform.
Who owns Jumia?
The general public owns the majority of the company (62%). Institutions own a significant stake at 26.9%, while public and private companies own the rest.
Three top shareholders own over 20% of the company. Baillie Gifford & Co. holds 9.76%, Comrie Limited has 6.52%, while Orange S.A. (NYSE: ORAN) owns 4.57%.
About Stjepan Kalinic
Forex, Equity Analysis, and Financial Education