Jumia stock price rebounded this week, soaring to its highest level since December last year. JMIA soared to a high of $4.70, up by 170% from its lowest level this year.
Jumia stock price soars amid takeover hopes
Jumia share price has surged in the past few months, mirroring the performance of most companies. The rally accelerated this week after Bloomberg reported that it was becoming a takeover target.
The report cited Axiom Telecom, a company based in Mauritius that aims to increase its footprint in Africa. In that line, it has raised $600 million to refinance its debt.
Axiom has been interested in Jumia for a while and has been accumulating its shares, making it the eighth-largest holder. Jumia is now valued at over $570 million, meaning that the potential bid would be worth over $700 million.
Axiom Telecom and Jumia have not responded to the report, and there is a possibility that it will be scrapped.
JMIA is facing major challenges
Jumia, which offers an Amazon-like e-commerce platform, has been under pressure in recent years as its growth slows and losses intensify. Its performance is a sign that demand for its products in key countries is falling.
The most recent results showed that its revenue came in at $36 million in the first quarter, down by 26% from the same period last year. This decline happened as its gross merchandise volume tumbled by 11% YoY.
Jumia’s revenue decline is because of the substantial competition happening across Africa, where e-commerce shopping has jumped. While Jumia is a popular company, users are opting for other way to shop.
A popular approach is where customers in urban areas use apps like Glovo to order food and groceries from nearby sellers. Unlike Jumia, these apps deliver their products within minutes.
As a result, SimilarWeb data shows that website and app traffic to some Jumia sites is falling. Jumia Kenya had 2.36 million visitors in May, down by 11.95% from a month earlier. Similarly, Jumia Egypt’s traffic dropped by 3% to 2.1 million, whle Jumia Ghana had less than 1 million visitors.
Its results also showed that its adjusted EBITDA was a loss of $15.7 million, a big increase from $4.3 million a year earlier.
Further, Jumia’s active customer growth is still sluggish. It ended the last quarter with 2.1 million users, down from 2.4 million in the fourth quarter. In contrast, other regional e-commerce companies like MercadoLibre and Coupang continue to see double-digit user growth.
Juma is working to boost its business by launching more services to complement its existing ones. It has ventured into Buy Now Pay Later (BNPL) solutions and expanded its delivery solutions in Nigeria.
Is it safe to buy Jumia shares?
The main reason to buy Jumia shares today is to hope that Axian will make a formal bid for the company, a move that would see it delisted in New York. Such a deal would be a good exit strategy for its investors who have endured substantial losses since it went public.
The risk, however, is if the deal fails and Jumia continues to operate as an independent company. Such a scenario is risky because of Jumia’s deteriorating financials and market share. If this happens, the next key level to watch will be at $1.75, the lowest swing in April.
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