Jumia Stock Jumps Nearly 16% Following Strong Quarterly Earnings and Strategic Capital Raise

Key Points

During August, Jumia Technologies (NYSE: JMIA) experienced a notable upward trend. This trajectory was largely driven by the company’s mid-month second-quarter earnings release, which coincided with the announcement of a capital raise supported by a prominent global financial institution. By the end of the month, the African e-commerce firm’s American Depositary Shares (ADSes) had closed nearly 16% higher.

Double-digit improvements

Published on August 12, the results revealed that Jumia’s revenue reached $52 million, representing a 14% year-over-year increase. Gross merchandise value (GMV) experienced even more significant growth, advancing by 20% to exceed $207 million.

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Management attributed these results to a pivotal strategic shift from first-party to third-party sales on its platform. Quarterly active customers, a vital metric for the company, surged 21% to 2.6 million. The firm performed exceptionally well in its home market of Nigeria, where total orders increased by 34% and GMV grew by 36%.

Despite the revenue growth, elevated expenses related to advertising and fulfillment widened the company’s net loss to $16.6 million, up from an $11.7 million deficit in the year-ago period.

The earnings release also disclosed that Jumia secured $50 million in new capital, spearheaded by a roughly $25 million investment from the World Bank’s International Finance Corporation (IFC). The remainder was sourced from equity purchase agreements with major institutional investor Axian and other shareholders.

In total, the IFC acquired nearly 9.06 million new ordinary bearer shares, a deal to be settled through ADSes at a ratio of two ADSes per ordinary share. Axian and the other investors purchased over 4.5 million new ADSes.

As part of the IFC agreement, the company entered into a “policy agreement” requiring adherence to the organization’s standards regarding performance, environmental impact, and social responsibility.

Jumia stated that the net proceeds from these sales will be utilized “to support its next phase of growth, enhance efficiency across its core African markets and strengthen its integrated marketplace and logistics network.”

Seeing red

The quarterly results were encouraging, though there is reason for concern that Jumia—a veteran in the African e-commerce space—has been operating at a loss for an extended period.

The company noted that its primary strategic objective is to achieve breakeven on adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by the upcoming fourth quarter. While this target appears attainable, it will require the company to sustain, or at least approach, the solid growth rates posted in the second quarter. With positive momentum on its side, the current performance tilts the outlook toward a bullish sentiment for its stock.

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