It has been an interesting year for Jumia. For months, Jumia’s shares traded around $3 to $5, way below its IPO price of $14.50. Unexpectedly, it saw a share price increase starting in May 2020 and by July, it had peaked at $13.36.
Although $13.36 was still below its IPO price, it still gave Jumia a market capitalisation of $1 billion; its highest valuation since August 2019.
An abrupt end to a market rally: Jumia’s Q2 2020 results was a reality check for the company. Despite reducing its losses for yet another quarter, investors were unimpressed by the company’s Gross Merchandise Value (GMV), which is the value of all items sold by Jumia.
The expectation was that the pandemic would see more people adopt ecommerce, thereby spurring growth for Jumia. In the end, the Q2 results dragged Jumia’s share price back to its previous levels.
A repeat of old trends: In what looked like a repeat of an old trend, Jumia’s shares saw another resurgence starting in October 2020. On October 23, its shares traded at $17.97 and Andrew Left, the founder of the research firm who at one time called Jumia a fraudulent company did an about face. He even shared that he had now bought shares in Jumia and was taking a long position.
The question on everyone’s mind during the October stock rally was: would Jumia’s Q3 results crush investors hopes again?
- Gross Merchandise Value (GMV) of €187.3 million, down 28% year-over-year
- Gross profit reached €23.2 million, a year-over-year increase of 22%
- Operating loss reached a three-year low of €28.0 million, decreasing by 49% year-over-year
- Revenue for Q3 of €33.7 million, a 17.7% decrease year-over-year
What’s the verdict? The stock market said bleh… On November 9, Jumia shares traded at $16 and when Q3 results were released on November 10, share prices closed at $13.29.
Yet, there are a handful of positives for Jumia and the last two quarters show that Jumia is shifting its focus. Since the pandemic, it has focused on selling everyday items like groceries and home essentials to its consumers.
It explains why, even though its number of active users is up to 6.7 million (22% change YoY), its GMV reduced by 28%. Most of its users are buying inexpensive groceries and household items.
The days when Jumia focused almost entirely on phone sales are long gone. Something else that’s worth noting is that Jumia is making progress in becoming a third-party marketplace.
As a result, revenue from third-party marketplace is €23.4m while first party revenue is a paltry €9.8m.
The bottomline: Jumia is focusing a lot on increasing its active users and reducing expenses but seems to be indifferent about raising revenues. Will Jumia be able to trim its way into profitability without increasing revenue?
Go deeper: Jumia’s Q3 earnings report