The share price of Jumia Technologies, one of Africa’s largest e-Commerce companies, fell 25% in the last 5 days as investors dumped the stock. The stock opened at $19.4 per share and fell to $14.09 per share as of Friday, November 21, 2021.
Jumia has seen its share price tank 65% year to date and 41.8% in the last one year. The stock has fallen from a year high $61 recorded in February 2021.
Jumia reported its third quarter 2021 results last week missing sales estimates despite recording a 9% growth. The company reported a GMV increase of 8.1% YoY to $238.1 million; Orders up 28% YoY to 8.5 million; Annual Active Consumers grew 8.1% YoY to 7.3 million. Operating losses ballooned 92.6% to $64 million compared to $33.3 million same period last year. Adjusted EBITDA losses also ballooned 94.3% to $52.5 million.
Quant ratings from analyst website, Seeking Alpha, “warned” that the stock is “high risk of performing badly”, contending that the stock is historically associated with poor future stock performance.
“Jumia has inferior profitability and decelerating momentum when compared to other Consumer Discretionary stocks, to the point that it gets a Very Bearish rating from our Quant rating system. Stocks rated Very Bearish by our Quant rating system have massively underperformed the S&P 500, as this article will describe,” Quant stated.
A cursory analysis of Jumia’s result suggests Jumia’s challenges emanate from slow growth despite a surge in spending on sales and advertising expenses. For example, in the third quarter results released, Jumia spent $24 million, $25.2 million, $22 million on Sales and Advertising, General & Admin expenses and Fulfillment expenses, a 228%, 10% and 13.3% respectively. In total, Jumia spent $52.5 million in the quarter ($27 million same period last year) despite posting a gross profit of $25.5 million.
Jumia generated a negative operating cash flow of $46 million in the quarter closing with a cash balance of $184.9 million. The company currently has an accumulated loss of $1.6 billion almost wiping out its share premium of $1.7 million. Net Assets (equity) closed at $486.8 million and in danger of getting wiped out in a couple of years if things do not improve.
The company guided that it will continue to spend on sales and advertising, technology and employee cost. It also plans to invest more on developing Jumia Pay which recently got updated with a “one click” payment option.
“We are focused on accelerating usage growth on our platform alongside the development JumiaPay and are investing in our business to that effect. In the fourth quarter of 2021, we expect to increase our investments in Sales and Advertising, Technology and staff costs expenses as compared to the fourth quarter of 2020.
“The ongoing COVID-19 pandemic as well as the ensuing macroeconomic challenges, result in substantial uncertainty concerning our operating environment and financial outlook. This may be further exacerbated by instances of social protests or political disruption, as experienced in South Africa in July 2021 for example,” Jumia stated.