The stock price of Jumia (NASDAQ: JMIA) has continued to decrease as the company continues to face several headwinds. On Thursday, the stock fell to a low of $2.52, 50% lower than its greatest point this year and 96% lower than its all-time high.
Winds are still blowing.
Jumia Technologies, Africa’s Amazon, is experiencing multiple headwinds as key countries in its ecosystem face major challenges. One of the most difficult challenges, as I discussed here, is related to the FX market.
The rising value of the US dollar has posed significant issues for several African countries. Since 2020, the Kenyan shilling has fallen by more than 50% versus the US dollar. Similarly, the Nigerian naira has reached an all-time low.
Other African currencies, such as the Nigerian naira, have fared far worse. This position is likely to deteriorate if US bond yields rise and the Federal Reserve maintains its aggressive stance. Senior Fed officials such as Mary Daly and Loretta Mester have expressed support for another 0.25% rate hike.
The African currency crisis has a significant impact on Jumia’s performance. First, it is causing significant inflation because most African countries rely heavily on imports. For example, an iPhone Pro Max that cost around Ksh. 120k in 2022 has now increased to more than $215k in Kenya.
This inflation will continue to harm the corporation in a continent with high unemployment and slow pay growth. The company’s revenue fell 15% to $48.5 million in the most recent quarter.
Second, the majority of Jumia sellers source their goods from China. while a result, while the dollar scarcity persists, they are now paying more for imports. Finally, Jumia reports its earnings in US dollars yet conducts business in local currencies. This means that its outcomes will always be hampered by currency fluctuations.
Jumia has implemented cost-cutting initiatives. It has, for example, left some unprofitable markets and cut fulfillment costs. These cost-cutting measures will not suffice.
The stock price of Jumia has dropped by more than 96% since its all-time high. Unfortunately, I do not see a road to recovery for the company because the macroeconomic situation in its core markets is not improving.
Jumia’s balance sheet is likewise insufficient. According to its most recent reports, its cash and short-term investments have decreased from $205 million to $166 million. The company’s revenue was $48.5 million in the same quarter, and its net loss was more than $31 million.
As a result, while Jumia’s cash balance and lack of debt are positives, the stock will continue to struggle as macroeconomic conditions deteriorate. As a result, I believe the Jumia stock price will continue to tumble. This is consistent with my previous Jumia forecast.
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