A Primal Panic In Jumia Technologies Did Not Change The Investment Thesis

Core Viewpoint - Jumia Technologies experienced a significant 53.8% drop in stock price following the announcement of a large secondary offering, despite reporting positive financial results and reaffirming guidance for the year. This situation poses a challenge for the company to regain investor confidence after a previous five-month rally that saw its stock increase nearly fivefold [2][11]. Financial Performance - Jumia reported a 15% year-over-year revenue increase in constant currency terms. The loss before income tax from continuing operations rose by 1% year-over-year, while adjusted EBITDA loss decreased by 11% year-over-year [8]. - The liquidity position decreased by $8.7 million from Q1, totaling $92.8 million. Jumia Pay transactions increased by 31%, raising its share of transactions from 32.0% to 39.1%, with total payment volume soaring by 49% in constant currency [8]. Customer Acquisition - Jumia has 2 million customers in a market of 600 million people, with a focus on stabilizing its active customer base after a strategic decline in money-losing marketing. The company aims to leverage its marketing spend effectively to acquire more customers [5]. - The company reported a 46% 90-day repurchase rate from new customers in Ivory Coast, indicating promising retention rates and expectations for overall improvement as efforts expand across markets [5]. Supply Chain Acceleration - Jumia plans to invest in accelerating supply, emphasizing that improved supply is crucial for growth. The company currently employs 60 staff in Shenzen, China, to source electronics and aims to scale up supply in other regions [6]. - A successful supply chain will create a virtuous cycle, where better supply leads to increased customer demand and improved pricing from suppliers [6]. Market Expansion - Jumia is focusing on expanding its reach beyond capital cities, with plans for technology investments in vendor platforms and marketing to enhance growth prospects [7]. - The share of orders from secondary cities has increased to 53%, up from 48% a year ago, with 73% of these orders processed through pickup stations, which are essential for Jumia's asset-light logistics model [10]. Strategic Challenges - The secondary offering of 20,227,736 ADSs is seen as a necessary move for long-term growth, despite the immediate negative impact on stock price. The company aims to use the funds to cushion against economic volatility and invest in strategic growth areas [11]. - The macroeconomic environment in Africa remains volatile, which necessitates a conservative approach to guidance and investment [4].