The Shares of Jumia Technologies rose 183.4% in July and has continued to climb in August. According to data from S&P Global Market Intelligence, the company’s share price is up roughly 12% for August.
The strong momentum for the tech sector and the online-retail industry in particular, has helped the African e-commerce giants bounce back from last years slum and post stellar gains in recent months.
However, as at the close of business on Tuesday, 11 August, Its stocks at the New York Stock Exchange (NYSE) was priced at $16.37 and the shares are down 3.38 points or 17.11%.
This comes after its shares reached a week high of $20.50 on Monday 10 August. In July, the stock had 5.368 million contracts set over the past session and Jumia shares’ daily volume is compared to its average trading volume at 4.101 million shares.
The recent boom in Jumia stocks could be traced back to the e-commerce boom caused by the pandemic. The first-quarter report shows a hike in demand among other factors that led to the uptick in the company stocks.
Partnerships with Popular Products
Jumia’s retail business enjoy heightened engagement amid shifting consumer behaviour caused by the pandemic. This was driven majorly by the change in strategy from short term investments in promotions and incentives to the partnership with a popular product with high customer retention.
The company partnered with household care and FMCG brands such as Nestle, Coca Cola, Reckitt Benckiser, Unilever and P&G which likely aided revenue generation in the quarter under review.
Jumia reduced sales and advertising expense by 25% in the first quarter ($8.9 million) but orders increased by 28% over the same period 12 months prior.
Looking at the growth of the company’s stocks, it’s evident that the market and investors took note and began to price its shares higher as a result. The added prospect for growth in Africa’s e-commerce market and this year’s unprecedented conditions appear to be accelerating the industry’s growth in the continent could also be factors.
Boom of JumiaPay
The growing momentum of contactless delivery is also expected to have benefited the promotion of JumiaPay. The preference of electronic transfer over cash transactions due to the pandemic has significantly increased the volume of transactions done using the payment platform.
It is also expected to have helped drive the company’s transaction volume in the second quarter.
In terms of payment options, Jumia announced implementation for Airtel Money as a digital payments option across its platform, but it’s unclear how much it factored into Jumia’s soaring growth and valuation.
30% increase in JumiaFood
Similar to JumiaPay, the pandemic also pushed a boom in Jumia’s food ordering platform. In recent months, the platform has been growing in double digits.
In June, Jumia’s online food ordering platform had seen sales climb at a 30% month-over-month rate since March
The continuous growth of Jumia Food across grocery and convenience retailers is expected to reflect in the coming second-quarter results.
Suggested read: Jumia Foods vs OFoods: All You Need to Know Before Ordering Your Meals
Jumia Series
The introduction of Jumia’s music streaming services together with its Stay Entertained with Jumia series is expected to have benefited the company during and after the shelter-in-place instigated by the pandemic.
Although the extent of the impact remains unclear, the new entertainment service will have added to the prospects investors considered.
Bullish Sentiment
Following the upward rise of Jumia shares this year, more investors have started to regain trust in the African e-commerce giants. The company’s stocks keep benefiting from market momentum and investor enthusiasm for the potentially explosive growth of e-commerce in the African market.
Incoming Q2 Report
In 2020, Jumia market capitalization has risen to roughly $1.3 billion and is valued at 7.4 times its expected sales for the year. The company is scheduled to report second-quarter earnings before the market opens on Aug. 12.
Similar to Q1, the increasing demand from brands and sellers are expected to have benefited Jumia to-be-reported quarter’s performance. However, short-term supply (especially foreign) and logistics challenges owing to social distancing restrictions induced by COVID-19 may be weighed on the to-be-reported quarter’s performance.
Zacks Consensus estimates that for the second quarter, the total sales will be about $33.61 million and bottom line will stand at a loss of 60 cents per share.
Conclusion
Even after the company’s stellar gains this year, its stock is still up just 20% from its $14.50 initial public offering price last August. However, as long as sales and gross profit growth rates remain elevated, there’s a good probability that the market will continue to reward the stock.
Also, Jumia Technologies has serious momentum at present as it heads into its second-quarter earnings. Shares have already increased by 370% since its first-quarter numbers and many of the stock market watchers believe the result would continue on the positive trend of the preceding quarter.
However, Yahoo Finance does not conclusively predict an earning for Jumia but instead is advising potential investors to hold.
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