Why Jumia Technologies Stock Jumped 24% This Week
Key Points
Jumia reported strong first-quarter growth, which kick-started the stock.
The e-commerce marketplace in Africa failed to generate a profit.
Shares of the stock look cheap, but the company is in a difficult spot scaling its business.
Shares of Jumia Technologies (NYSE: JMIA) shot up 24% this week, according to data from S&P Global Market Intelligence. The African e-commerce and payments provider saw solid growth in the first quarter, causing investors to get more bullish on the stock. It is still down 87% from all-time highs set in 2021.
Here's why Jumia Technologies stock soared this week, and whether investors should consider buying the stock right now.
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Strong growth, lack of profits
Jumia aims to build an e-commerce marketplace in Africa, focusing on countries such as Nigeria, Kenya, and Morocco. Last quarter, revenue grew 39% year over year to $50.6 million, driven by a 31% increase in marketplace spending to $211 million. Orders also grew 31%, while active customers increased 26% over the period.
Growth looked great across the board in the quarter. However, for Jumia, the problem remains profitability. It posted an operating loss of $13.9 million in Q1, and has never generated an operating profit since going public in 2020.
Image source: Getty Images.
Is Jumia stock a buy?
Jumia has been a highly volatile stock, mostly disappointing investors since going public. With a market cap of just $1 billion and a stock price of $8.70 as of this writing, investors may think shares are a bargain right now.
Remember that profitability is all that matters at the end of the day. Jumia has never been profitable and will likely continue to struggle to turn a profit due to the complexities of operating an e-commerce network in Africa. Stay away from Jumia stock right now.
Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.