Jumia stock price is firing on all cylinders: is it a good buy?

By:
on Jun 6, 2024
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  • Jumia Technologies shares have surged to its March 4th highs.
  • The company’s revenue has grown and profits have narrowed.
  • It faces substantial challenges, especially the rising competition.

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Jumia (NASDAQ: JMIA) stock price is firing on all cylinders as investors place their bets on the Amazon of Africa. The shares soared to a high of $7.76 on Wednesday, its highest level since March 4th. It has soared by more than 250% from its lowest level in 2023.

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Jumia’s faces major headwinds

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Jumia is the biggest pureplay e-commerce company in Africa with a presence in key countries like Kenya, Nigeria, Morocco, and Egypt. The company runs a marketplace where people can buy products and receive them at the comfort of their homes.

It has worked hard to replicate the success of other e-commerce companies like Amazon, Mercadolibre, and Indonesia’s Shopee. For example, it has boosted its logistics network by partnering with local businesses and started a subscription service.

However, as I have written before, I remain pessimistic about Jumia for several reasons. First, competition in the e-commerce industry is rising. The biggest one is coming from supermarket chains that have boosted their e-commerce operations.

For example, in Kenya, it is easy for people to do their shopping from leading supermarket chains like Naivas and Carrefour from the comfort of their homes. Most importantly, unlike Jumia, these chains can ship these products within a few minutes.

There are other competitors such as Glovo, the Spanish delivery giant that raised $528 million in 2021. The company lets people shop online and its network of carriers delivers within minutes.In addition, Jumia is competing with other online sellers who focus on social media marketing. 

The other challenge that Jumia has to contend with is currency fluctuations in key markets. While the Kenyan shilling has rebounded this year, the Nigerian naira has still plunged to a record high. Weaker local currencies hurt Jumia’s sellers, who mostly import from China. It also hurts shoppers, who have to pay more money for products.

Further, data by SimilarWeb shows that the traffic to Jumia’s website in key countries is falling. Its traffic in Kenya crashed to 1,63 million in March from 1.91 million in February. Other local sites have also seen a drop in traffic.

Jumia stock

Jumia Kenya traffic

Jumia’s most recent results showed a big spread between the reported and constant currency metrics. Revenue rose to $48.9 million and $64.8 million in constant currency. Its operating loss narrowed to $8.3 million. The company ended the quarter with $101 million in liquidity, of which $28.6 million was cash. 

Jumia stock price forecast

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JMIA chart by TradingView

Turning to the daily chart, we see that the JMIA share price has been in a strong bull run in the past few months. This rally intensified after the company made a golden cross pattern when the 50-day and 200-day Exponential Moving Averages (EMA) crossed each other. 

Since then, Jumia has remained above the Ichimoku cloud indicator while oscillators like the MACD and the Average Directional Index (ADX) show that it has the momentum. 

Therefore, from a technical perspective, the stock could continue rising as buyers target the year-to-date high of $8.10. In the long term, I suspect that the stock will resume the downward trend because of its weaker fundamentals.

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