Analysts at Tellimer have downgraded Jumia, a leading African focused e-commerce giant to a sell after what the emerging market investment firm accused the firm from taking profit on irrational exuberance.
The recent downgrade is coming at the time when one of its key investors, MTN is seeking to offload stake in the e-Commerce company.
MarketForces recalls that mid-July, 2020, Tellimer had advised investors to Buy Jumia, having noted that the Africa’s Amazon was set to ride on Facebook’s coattails.
“We raise Jumia’s target price to US$9.10 which then implied a 20% upside from US$6.00 on the improved prospects for digital infrastructure in Africa”, Tellimer said.
The emerging market investment firm stated that it raised implied price to sales multiple-derived target price and earnings forecast.
Jumia was trading at 2.8times price to sales (FY 21) against an EM e-commerce average of 4times.
Analysts hoped that Facebook’s Express Wi-Fi program raises the prospects for digital infrastructure in Africa – it will add US$300m of digital capacity 2020-24.
Meanwhile, MTN has been disposing of non-core assets as part of the company’s strategy to reduce debt and drive future growth.
In its equity research report, analysts explained that Jumia’s stock gained 164% last month but Tellimer said even the most optimistic scenario cannot justify this rise.
The emerging market firm noted to maintain an implied price to sales multiple-derived target price and earnings forecast.
According to Tellimer’s equity note, JMIA is trading at 4.4times price to sales (FY 21) against an Emerging Market e-commerce average of 4.0times.
Analysts at the emerging market explained that Jumia stock price has been riding on expectations of a sales boost in Q2 20 results on 12 August.
Commenting on the performance, Tellimer stated in its equity note that even the most optimistic scenario cannot justify this rise.