Jumia Technologies’ Model Shows Resilience, on Track for Breakeven EBITDA by Year-End

Jumia Technologies AG (NYSE:JMIA) delivered a "good" performance in the second quarter, against low expectations due to several headwinds, according to RBC Capital Markets.

• Jumia Technologies stock is showing notable weakness. Why are JMIA shares down?

The Jumia Technologies Analyst: Analyst Brad Erickson maintained an Outperform rating, while cutting the price target from $15 to $13.

The Jumia Technologies Thesis: While Jumia Technologies’ Pan-African exposure means headwinds would be "a somewhat regular occurrence," the model is "showing resilience," and the company is tacking towards its goal of breakeven EBITDA and FCF positive by year-end, Erickson said in the note.

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Erickson highlighted the following from Jumia Technologies’ results:

• GMV (gross merchandise value) grew 20% year-on-year to $216.3 million but was 4.2% below Street expectations.
• Physical orders were in line with expectations, offset by a 3% miss on AOV (average order value).
• Quarterly active customers grew 21% (23% ex-Algeria) year-on-year to 2.6 million.
• EBITDA loss of $8.7 million, better than consensus estimate of a loss of $10.5 million.

Jumia Technologies remains Africa’s leading e-commerce platform and exhibits improving unit economics and "plenty of white space to become a bigger company over time," the analyst wrote.

He cited the headwinds as:

• Component shortages affecting smartphone supply.
• Cocoa prices affecting Ivory Coast consumer demand.
• Higher oil prices

Any easing of these headwinds would result in the company meeting the mid-point of its guidance, Erickson said.

"Previously announced headcount reductions, electronics more muted impact on gross profit and scale, and S&M cost controls into the holidays are what’s allowing for maintaining the FY profitability targets and speak to management’s command over operating through this volatility," he wrote.

Jumia Technologies raised capital worth $50 million, representing a 3.2% dilution at current levels, the analyst stated. "We’re encouraged at both the credible quality of the investors as well as hearing about what was a heavily scrutinized diligence process ahead of the deal," he further noted.

JMIA Price Action: Shares of Jumia Technologies had declined by 3.19% to $6.22 at the time of publication on Thursday.

Photo: Courtesy Jumia Technologies