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Why Jumia Technologies Stock Fell 23% Last Month

The Motley Fool logo The Motley Fool 3/2/2021 Jeremy Bowman
a man riding on the back of a motorcycle: Why Jumia Technologies Stock Fell 23% Last Month © Provided by The Motley Fool Why Jumia Technologies Stock Fell 23% Last Month

What happened

Shares of Jumia Technologies (NYSE: JMIA) finished last month lower after the African e-commerce company succumbed to the tech sell-off at the end of the month. The company also delivered a fourth-quarter earnings report that briefly lifted the stock before it continued its slide.

According to data from S&P Global Market Intelligence, the stock finished the month down 23%. As the chart below shows, the stock's slide came during the second half of the month.

chart, line chart: JMIA © YCharts JMIA

So what

The tech-heavy Nasdaq index peaked on Feb. 16 and began to pull back as interest yields rose and anticipation for the economic reopening mounted. Jumia had entered the month on a blistering run, rising from less than $3 early on in the pandemic to more than $60 at the beginning of February, but a number of investors had argued that the stock was overvalued.

a man riding on the back of a motorcycle: A Jumia delivery worker. © Jumia Technologies A Jumia delivery worker.

The big news on the company came on Feb. 24 when it reported earnings, and the stock actually rose on the news, climbing 6.7% as investors were pleased with the results. Gross merchandise volume (GMV) was down 21% year over year to 231.1 million euros ($278.7 million) as the company shifted its focus to everyday products, rather than big-ticket items.  Gross profit rose 12% to 27.9 million euros, and it narrowed its adjusted EBITDA loss 47% to 28.3 million euros. Revenue slipped 15.3% to 41.8 million euros due to a decline in first-party revenue as it shifts to a marketplace model.

Despite its gains on the day of the report, the growth stock resumed its decline over the last two days of February as the Nasdaq also slipped.

Now what

Jumia offers one of the higher levels of risk/reward in the market today. The company is the leading e-commerce company in Africa, a region that other operators have avoided because of poor infrastructure. Its financial results have yet to inspire confidence as GMV is declining, the company had uncovered fraud among some of its sales force, and the path to profitability is unclear.

Over the near term, the company has set a target of reaching breakeven. Investors should keep an eye on its progress toward that goal since that will be the benchmark to judge the stock over the coming quarters. 

Jeremy Bowman 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.


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