Jumia Technologies stocks are attracting more attention as lots of investors have started to notice the company. Also, the bullish narrative of the company looks very compelling at first glance. But, before making a final decision to invest, it is very important to analyse and study the flow to reduce the chances of incurring losses as you will not be able to make bigger gains by piling into opportunities that everyone recognizes. Jumia Technologies is a German company providing e-commerce services to various African countries.
Founded in the year 2012, the company is also known by the nickname “Amazon of Africa” and boasts over 1 billion visits to its marketplace in 2019 and has more than 110,000 active sellers. The market capitalization of the company is at USD 5.6 billion.
Here are few reasons to avoid investing in Jumia Technologies
1. Overvaluation of the JMIA Stock
The strengths of the company must be considered before investing, no matter how appealing the stock is. Talking of the positive aspect, Jumia has a robust cash-to-debt ratio and its Altman Z-Score is at 12 points which denotes it as a safe and stable organization.
And now coming to the drawbacks, the JMIA stocks are highly valued. The shares of the company are priced at nearly 55 times book value and are also priced at almost 30 times sales.
2. Access to broadband connectivity
According to a statement of the World Bank, across Africa, the access to broadband connectivity is available to less than a third of the population and an investment of USD 100 billion will be required to achieve universal, affordable, and good quality internet access by 2030. The World Bank Group also called for an urgent action to close the internet access gap while providing a roadmap to reach this ambitious goal.
On analysing the context, it can be said that Jumia alone cannot transform this expansive market. In 2020, Jumia’s home market of Nigeria featured comparatively strong internet penetration at just under 47 percent. Also, internet accessibility is not projected to hit 65.2 percent until 2025.
3. Bullish market
The share price of the company is rising for the time being but when it crashes, then it will not be loved by the investors. The narrative of the JMIA stock on paper is intriguing but it can be misleading as well at the same point of time.
Read all the Latest News, Breaking News and Coronavirus News here
Comments
0 comment