Jumia (NYSE:JMIA), an e-commerce platform provider focused on the African market, saw its shares soar on Tuesday following a strong analyst endorsement. Experts at Benchmark initiated coverage of JMIA stock with a “buy” rating. In addition, they anticipate that shares will swing up to $14. That implies upside potential of over 60% relative to Monday’s close.
According to a Seeking Alpha report, Benchmark analysts led by Fawne Jiang stated that Jumia is in a favorable position to capture the “unmet pent-up demand” in the African e-commerce sector. Because the Berlin, Germany-based enterprise is a leader in the continent’s online commerce arena, it stands poised to benefit from the underlying demographic transition. This dynamic could spark multiyear and potentially even multi-decade growth.
“JMIA presents a unique investment opportunity with a highly attractive risk/reward bolstered by both organic value creation and an asset recognition longer term,” Jiang added.
To be fair, the latest assessment of JMIA stock is somewhat contrarian. Per TipRanks, Citi reiterated its “hold” rating – without a price target – on Aug. 15, 2023. Morgan Stanley issued a “hold” on Jan. 3, 2024 but upgraded its price target to $3.60 from $3.
However, shares are now well above this range, trading hands at over $11 currently.
Potentially Untapped Opportunity for JMIA Stock
Since the start of the year, JMIA stock has gained approximately 229%. To put that performance into context, tech powerhouse Nvidia (NASDAQ:NVDA) has gained around 170% during the same period. Naturally, some investors will feel hesitation bidding up an equity that has already moved so much.
However, the main catalyst for JMIA stock is the African e-commerce sector. Some nations within the continent are considered frontier markets, while others are rising into emerging market status. Obviously, such fertile ground presents high risks. At the same time, there are also potentially high rewards as speculators will be betting in the early innings.
According to Statista, Africa’s e-commerce market sales may reach $34.57 billion by the end of this year. By 2029, the ecosystem could generate revenue of $56.03 billion, implying a compound annual growth rate (CAGR) of 10.14%.
However, an even more compelling argument comes from the International Trade Administration, which is under the U.S. Department of Commerce. Economists estimate that Africa will surpass 500 million e-commerce users by 2025. Even at that point, e-commerce penetration would only be 40%.
Such a framework gives credence to Benchmark’s view that JMIA stock could provide possibly multi-decade gains. Again, it’s a risky idea but will likely entice forward-looking investors.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
