Jumia Stock Analysis - Amazon of Africa
Jumia $JMIA is known as the Amazon of Africa but just like MercadoLibre or Sea Ltd. it has more in common with Alibaba $BABA than with Amazon. Africa is the fastest growing nation on Earth both by GDP and Jumia currently only serve 7 million out of the 1.3 billion people. The potential market for Jumia is really big but the company still faces many challenges.
Jumia has three business segments:
1. E-commerce - Operates a marketplace
2. Jumia Logistics
3. Jumia Pay
Most ecommerce companies had higher sales because of the pandemic but not Jumia. Jumia GMV (Gross Merchandise Volume) too is down as the company decided to sell cheaper items. In the past, they were focusing on electronics but not anymore. This means they can eventually reach a broader market.
However, Africa has low internet penetration, low urbanization and most people are not accustomed to paying online by a credit card. That's the competitive edge of Jumia. They know the African market very well and how to deal with the locals.
Africa has a very young population and people are getting richer at a fast rate with more and more internet connection. How likely is it that these young people are going to use more internet and shop online? If happened on other continents, it will happen in Africa too and Jumia can conquer a big market.
The main problem with Jumia is that they are still losing a lot of money. They spend a little too much on compensation and they are diluting the shares.
Jumia is like an Call Option on Africa. This company will lose a lot of money in the first 10-15 years but once it becomes profitable (if it becomes), it can be a big success.
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