Jumia (NYSE: JMIA) and ContextLogic‘s (NASDAQ: WISH) Wish are two of the most volatile and controversial ecommerce stocks around.

Jumia, a German e-commerce company that sells its products in a dozen African countries, went public at $ 14.50 a share in 2019. The stock fell to $ 7 a share last September, soared in the mid-1960s during the stock market frenzy. in February, and is now trading at around $ 20 a share.

Wish, a U.S. cross-border marketplace that mainly sells inexpensive goods from Chinese sellers, went public at $ 24 a share last December. The stock first slipped below its IPO price, rebounded to a low of $ 30 during the meme stock rally in February, but then plunged to around $ 10 per share.

Image source: Getty Images.

Are either of these ecommerce stocks worth buying? Let’s dig deeper into Jumia and Wish’s growth rates, valuations, and challenges to find out.

Jumia faces an uphill battle in Africa

Jumia has established an advantage in the emerging e-commerce market in Africa, but the low incomes of its potential customers, low internet penetration rates and underdeveloped infrastructure make its expansion very difficult.

The year-over-year growth in gross merchandise volume, total orders, annual active customers, total JumiaPay payment volume, and revenue seemed impressive at the time of its IPO, but that momentum is growing. is out of breath throughout 2020 and the first half of 2021.

Metric

Growth for the 2019 financial year (year-on-year)

Growth for fiscal year 2020 (YOY)

Growth 1h 2021 (YOY)

GMV

33%

(19%)

(8%)

Orders

85%

5%

8%

Annual active consumers

52%

12%

3%

POS

127%

58%

ten%

Income

24%

(13%)

4%

Data source: Jumia. GMV = Gross volume of goods. YOY = year after year.

Jumia’s slowdown last year was particularly disappointing as the pandemic generated strong tailwinds for many other e-commerce companies, including Free Mercado in Latin America and Limited sea‘s Shopee in Southeast Asia and Taiwan.

Jumia attributed this deceleration to three major changes. First, it closed its markets in Cameroon, Tanzania and Rwanda in 2019 to streamline its operations. Second, it expanded its third-party market while shrinking its proprietary, capital-intensive market place, but this shift reduced its direct revenues. Finally, Jumia moved away from more expensive products like consumer electronics and sold cheaper consumer staples to attract more buyers. This is why its total number of orders increased in the first half of 2021 but its total gross merchandise volume (GMV) decreased.

For the full year, analysts expect Jumia’s revenue to grow 10% to $ 185 million, but its net loss to increase as it expands its ecosystem and its infrastructure. Those growth rates are low for a stock that is trading at 11 times this year’s sales – but the Bulls believe its markets will reach well beyond its current market of around 7 million buyers.

Wish’s growth is not that impressive

Wish served 101 million monthly active users last quarter. It mainly generates its revenue from transaction, logistics and advertising costs – and its revenue growth initially appears robust:

Metric

Growth for the 2019 financial year (year-on-year)

Growth for fiscal year 2020 (YOY)

Growth Q1 2021 (YOY)

MAU

23%

19%

(7%)

Income

ten%

34%

75%

Data source: ContextLogic.

However, Wish grew at a slower pace than larger markets like Amazon, MercadoLibre, and Shopee during last year’s pandemic. Its first quarter numbers also benefited from an easy comparison with the impact of the pandemic on its orders from China a year ago. Wish’s MAU growth is stagnating, but it believes it can increase its revenue per active buyer to offset this slowdown.

In the second quarter, Wish expects its revenue to grow only 2% to 4% year over year. Analysts expect its revenue to grow 24% for the full year, but its bottom line to remain in the red. On the positive side, Wish Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) the margin further improved sequentially and year-over-year in the last quarter, so that it may gradually approach profit on an adjusted EBITDA basis.

Wish faces several long-term challenges. Most of Wish’s merchants are located in China – which exposes it to challenges over counterfeit products, tariffs, and trade war headwinds – and orders take a long time to receive and return.

Wish also relies heavily on aggressive discounts and flash sales to attract buyers, and its MAUs are scattered across more than 100 countries, weakening its competitive edge over regional e-commerce leaders like Shopee and MercadoLibre. Alibaba Holding GroupAliExpress, which connects Chinese merchants with foreign buyers, also remains a long-term threat.

Wish is only trading twice this year’s sales, but this steep discount indicates investors aren’t too convinced that it has much resistance in the crowded ecommerce market.

The winner: Jumia

I’m not a fan of either stock right now, especially when Sea, MercadoLibre, Amazon, and other ecommerce companies have better long-term prospects. But if I had to choose one over the other, I would take my chances on Jumia’s nascent business as it could eventually grow as quickly as MercadoLibre did in Latin America as income levels, Africa’s e-commerce infrastructure and penetration rates are improving. .

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


Source link

About The Author

Related Posts