E– commerce businesses have performed exceptionally well during the heat of the pandemic as consumers have relied on online platforms to purchase goods. Popular online shopping stocks like Amazon, Shopifyand Etsy as a result, made massive bull runs, returning 75%, 258%, and 518% to investors from April 1, 2020 to December 31, 2021, respectively.
The narrative has changed lately. As COVID-19 threats wane and consumers return to physical stores, e-commerce businesses are left with comparable unfriendly metrics from a year ago. A high-risk, high-reward e-commerce stock that has been particularly crushed in recent memory is Jumia Technologies (NYSE: JMIA)the first African online shopping platform.
Down 76% year-on-year and 38% year-to-date, African e-commerce stock continues to tumble in the wake of several macroeconomic headwinds. Still, the company has demonstrated notable improvement in recent quarters, and given its continued decline, long-term investors should consider getting on board today.
The company is getting stronger
After struggling to develop its platform in the past, Jumia has really started to make progress. In its first quarter of 2022, gross merchandise volume (GMV) increased 27% year-over-year to $252.7 million, and total sales soared 44.3% to reach $47.6 million, thanks to a 152% increase in direct sales. The total number of active buyers and orders increased by 29.2% and 40.9%, reaching 3.1 million and 9.3 million respectively.
Management has been very transparent with their plans to increase spending in order to grow the platform. This, however, resulted in monstrous losses for the company – its EBITDA-adjusted loss jumped 70% to $55.3 million in the first quarter from a year ago. For the full year, management expects an EBITDA loss in the range of $200 million to $220 million.
There are a few positives associated with his recent losses. In addition to improving growth, the company believes it has passed the peak of Adjusted EBITDA losses and is expected to start reporting a lower year-over-year loss from the start of the year. fiscal year 2023.
Likewise, Jumia is evolving to become much more than an e-commerce marketplace. the company’s JumiaPay, which works similarly to PayPal, plans to expand to third-party merchants soon. Serving as a financial technology (fintech) wing, JumiaPay offers the company enormous growth potential in the coming years. With its logistics-as-a-service offering and other early-stage ventures like its e-doctor service through the JumiaPay app in Nigeria, it’s clear that the company’s growth avenue is more than massive.
it’s time to buy
Africa’s growth story is alive and well – with over 1.2 billion consumers spread across the continent, the potential for growth and innovation is endless. Jumia’s market capitalization is just $749 million today, and the stock trades at a futures price multiple of just three, which is the lowest since the company went public in 2019. The stock is surely a risky investment, and the company is probably years away from breaking even.
That said, so far I think the potential reward outweighs the inherent risk. Jumia is building something special, and given the progress it has made lately, I think the stock deserves serious consideration.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Luke Meindl holds positions at Jumia Technologies AG-ADR and PayPal Holdings. The Motley Fool holds positions and recommends Amazon, Etsy, PayPal Holdings and Shopify. The Motley Fool recommends the following options: $1140 January 2023 Long Calls on Shopify and $1160 January 2023 Short Calls on Shopify. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.