There's been a major selloff in Jumia Technologies AG (NYSE:JMIA) shares in the week since it released its yearly report, with the stock down 34% to US$4.07. Revenues were €160m, with Jumia Technologies reporting some -5.6% below analyst expectations. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the current consensus from Jumia Technologies's eight analysts is for revenues of €184.6m in 2020, which would reflect a solid 15% increase on its sales over the past 12 months. Per-share statutory losses are expected to explode, reaching €2.46 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of €228.4m and losses of €2.43 per share in 2020. There's been a definite change in sentiment after these results, with analysts administering a to next year's revenue estimates, while at the same time substantially upgrading EPS. It's almost as though the business is forecast to reduce its focus on growth to enhance profitability.
Analysts have cut their price target 18% to €7.89 per share, signalling that the declining revenue and ongoing losses are contributing to the lower valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Jumia Technologies, with the most bullish analyst valuing it at €18.17 and the most bearish at €2.94 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that analysts expect Jumia Technologies's revenue growth will slow down substantially, with revenues next year expected to grow 15%, compared to a historical growth rate of 23% over the past year. Compare this to the other companies in this market with analyst coverage, which are forecast to grow their revenue at 16% per year. So it's pretty clear that, while Jumia Technologies's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for next year. Analysts also downgraded their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Jumia Technologies's future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on Jumia Technologies. Long-term earnings power is much more important than next year's profits. We have forecasts for Jumia Technologies going out to 2024, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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