Why Jumia Technologies Stock Blasted Almost 16% Higher Last Month
Key Points
For the most part, Jumia Technologies (NYSE: JMIA) stock was on an upward trajectory in August. Much of this had to do with the second-quarter earnings report it posted mid-month, accompanied by an announcement of a capital raise backed by a familiar global financial agency. The African e-commerce company’s American Depositary Shares (ADSes) closed the month nearly 16% higher.
Double-digit improvements
Those results were published on Aug. 12 and revealed that Jumia’s revenue totaled $52 million. That was good enough for a 14% year-over-year improvement. Gross merchandise value (GMV) rose more steeply, advancing by 20% to more than $207 million.
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Management attributed this to a major strategic change, in which the company has shifted from first-party to third-party sales on its platform. Quarterly active customers, a key metric for Jumia, surged 21% higher to 2.6 million. It did particularly well in its home country of Nigeria, where total orders rose by 34%, and GMV increased by 36%.
On the bottom line, higher expenses for items like advertising and fulfillment widened the company’s net loss to $16.6 million from the year-ago deficit of $11.7 million.
Jumia also revealed in the earnings release that it had secured $50 million in fresh capital, led by a roughly $25 million infusion from the World Bank’s International Finance Corporation (IFC). The remainder was drawn from equity purchase agreements with one of its largest institutional investors, Axian, and other shareholders.
All told, the IFC purchased nearly 9.06 million new ordinary bearer shares; this deal is to be closed with ADSes, at a ratio of two ADSes per each ordinary share. Axian and the other investors are snapping up more than 4.5 million new ADSes.
As part of the IFC arrangement, the company signed a “policy agreement” mandating compliance with a set of the organization’s performance, environmental, and social impact standards.
Jumia said that it would use the net proceeds of these sales “to support its next phase of growth, enhance efficiency across its core African markets and strengthen its integrated marketplace and logistics network.”
Seeing red
I’d say the quarterly results were encouraging, although I’d be concerned that Jumia — now a veteran on the African e-commerce scene — has been posting losses longer than is comfortable.
It did say in the earnings report that a key strategic goal is to reach breakeven on adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) as soon as the coming fourth quarter. I think that’s achievable, but it’ll have to maintain (or at least approach) the solid growth rates it posted in frame No. 2. The company has momentum on its side, which tips me into the bull camp for its stock.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
