Why Jumia Technologies Stock Flopped on Friday

The stock of African e-commerce company Jumia Technologies (NYSE: JMIA) ended the week on a down note Friday. The company's shares lost more than 9% of their value following a rather aggressive downgrade from an analyst. That occurred on a trading day when the S&P 500 index rose by 0.5%.

Double downgrade

Well before market open, Aletheia Capital's Nirgunan Tiruchelvam pushed his Jumia recommendation two steps down -- to sell from his previous buy. His price target on the stock is $7.50 per share, quite some distance below its most recent close of $10.75.

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According to reports, Tiruchelvam's main concern is the company's net working capital position. In his update, he wrote that improvements in the metric were temporary and unsustainable. He also noted that Jumia stock is priced higher than peer e-commerce titles in terms of its enterprise value-to-sales ratio.

The shares have been on quite a tear lately as the analyst pointed out. They've increased by 153% in value since Aug. 1.

A history of red ink

Another factor in Jumia's rise, as CEO Francis Dufay divulged recently, is that it's benefiting from the clutch of tariffs imposed by the U.S. on major importers to the country. Chinese vendors have been more conciliatory in dealing with the company, leading to hopes this could help clear a path to better bottom-line performance.

That's encouraging, but the stock's sharp rise looks rather perilous, as the company hasn't yet proven it can kick its persistent habit of posting net losses.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.