Jumia's share price has flatlined since it listed on the New York Stock Exchange back in April 2019. The first African tech start-up to list, Jumia’s [JMIA] share price rocketed to $49.77 in the first week of trading.
But that jubilation was short-lived. Accusations of fraud and huge losses soon saw investors lose confidence in the e-commerce platform. In December, Jumia's share price closed the year at $6.72. A disastrous decline.
But that was all before the coronavirus outbreak. Now, the 'Amazon of Africa' could see a turnaround in fortunes through a surge in online shopping. So, what should Jumia’s share price investors look out for in this week's Q1 earnings?
What's happening with Jumia's share price?
So far this year, Jumia's share price has dived 11%. While the coronavirus outbreak has hit the stock, it was already on a downwards spiral in January. Still, since a 20 March year-to-date low, the share price has gained 153% on speculation that demand for Jumia’s services might increase.
When does Jumia report Q1 earnings?
Why should investors care?
Coronavirus boosts engagement
Jumia has reported increased activity on its commerce platform since the coronavirus outbreak. With bricks-and-mortar shops shutting, Jumia could benefit as locked-down consumers flock online.
In a letter to investors, co-founder and CEO Jeremy Hodara and Sacha Poignonnec said:
"We view these dynamics as a unique opportunity to accelerate the shift towards e-commerce and drive payment adoption in our countries."
“We view these dynamics as a unique opportunity to accelerate the shift towards e-commerce and drive payment adoption in our countries” - co-founder and CEO Jeremy Hodara and Sacha Poignonnec
To capitalise, the company has introduced grocery options, contactless delivery and cashless payments. This could all lead to greater revenues and customers. At the end of 2019, Jumia had 6.1 million active users, up from 4 million the previous year. How this figure has grown will be a key metric in the upcoming earnings announcement.
Burning through cash
Jumia's revenue might be growing year-on-year, but its losses are also increasing. In 2019 it pulled in €160 million, up 24.29% from 2018. But that's nowhere near enough to cover its losses. In 2018 Jumia reported a €170 million loss. In 2019, those losses have only steepened.
Jumia's active users at end of 2019 - a 4 million rise from 2018
Jumia is using financing to keep going - totalling €316.83 million in 2019, or 197.51% of revenues. While start-ups can go for long periods before becoming profitable, the cash burn at Jumia is bound to raise eyebrows among investors. The e-commerce provider will have to demonstrate that its cost-cutting initiatives are moving things in the right direction if it is to restore confidence in the stock.
What are analysts expecting for Q1?
Analysts tracking the stock on Yahoo Finance expect an average loss of $0.74 a share, down one cent from the same quarter last year. Revenue is forecast to come in at $37.73 million, on par with the $39.64 million seen last year.
Jumia's forecasted Q1 revenue
Time to buy Jumia?
Analysts have pinned a $5.83 average share price target on the stock, broadly in line with current levels. Of the eight analysts tracking the stock on Yahoo Finance, half rate it a Hold.
While the current coronavirus outbreak could see a short-term upswing in Jumia's share price, the jury's still out on whether it's a long-term investment. For investors, Jumia will have to demonstrate that it can get its books in order and stop the cash burn. Jumia has told investors it plans to be profitable by 2022. But given the scale of its losses, the ‘Amazon of Africa’ has a long way to go.