A Look At Jumia 🌍 And PayPal 💸

Your Easy Briefing On Under-Hyped Stocks 👀

Hello Benchmarkers!

Happy to have you on board! Today, we provide you with an easy briefing on 2 under-hyped and high-growth companies:

  • PayPal Holdings 💸

  • Jumia 🛍

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Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

PayPal Holdings 💸 (NASDAQ:PYPL)


PayPal was founded by Peter Thiel, Max Levchin and Luke Nosek in 1998. In 2000, it merged with Elon Musk’s X.com and went public in 2002. Quickly after its IPO, it was bought by eBay as over 70% of merchants on the auction platform already used PayPal.


It is no secret that the online payments market is huge. Here are some estimates:

  • Research And Markets expects the global payments gateway market to reach $ 87B in 2025, up from $ 31B in 2016

  • Markets And Markets expects the digital payments market to double in size by 2025 to $ 154B from $ 79B in 2020


The online payment market is made of two key components: merchants and consumers. Square, a competitor of PayPal, estimates its merchants market to be worth $ 100B and its consumer market to be worth $ 60B. Insuring a strong presence in both markets is key for locking in users.

  • PayPal now boasts 361m active consumer accounts for its PayPal App, representing a 22% year-over-year increase. These users rely on PayPal to pay for items online and send / request money from their friends

  • Venmo is another tool directed at consumers. It now counts 60m active users and processed $ 44B in payment volume in Q3 ‘20 growing by 61% year over year. It offers loyalty features, rewards and cash-back incentives to users

  • Users can also buy cryptocurrencies through the PayPal App and Venmo. It is reported to PayPal and Square scooped up 100% of the newly mined crypto assets as their users flocked to buy these

  • On the business side, PayPal counts 28m merchants accounts. These accounts enable merchants to receive payments from their customers through a wide array of tools:

    1. Accept online payments on their website with Braintree

    2. Accept payments in-store and on their web shop with iZettle

    3. Integrate PayPal into their own marketplace in order to accept and disburse funds between consumers and businesses

    4. Offer “Buy Now Pay Later” in order to provide the new credit services consumers need

  • PayPal also entered the Chinese market with its acquisition of GoPay. This enables it to partner with Chinese financial institutions and technology platforms to provide a comprehensive set of payment solutions to merchants and consumers in China


PayPal is not standing still and quickly entering new markets in order to stay relevant. It is doing so by creating a strong closed network of consumers, merchants and partners (other payment systems, banks, POS systems, website builders).

This enables it to become a critical player in most of its new ventures. Venmo and their POS solutions are prime example of this and are now followed by their “Buy Now Pay Later” solution.


  •  PayPal Holdings’ sales are growing at 25% YoY (and 22% in previous quarter) and reached $ 5.45B in Q3 ‘20

  • Its operating margins increased to 18% in Q3' ‘20 from 16% in Q3 ‘19 and net income reached $ 1B versus $ 462m a year earlier

  • The company is now sitting on a $ 6B pile of cash and has over $ 48B in current assets versus $ 35B in current liabilities


  • PayPal is too big to be ignored in the financial technology space. Generating $ 5.5B in sales and growing at 25% YoY

  • Venmo recently introduced its credit card and is adding new features (loyalty, rewards, cash back) to increase customer and merchant usage

  • We can see a compelling story made of opportunities in China, an expansion into Buy Now Pay Later, a significant foray into cryptocurrencies, a very strong foot in B2B with their POS offering and a recent entry into cryptocurrencies

  • PayPal has a large established (and growing) user base and its foray into new markets only make it help more competitive in the online and offline world

We have a full position in PayPal Holdings.

Jumia 🛍 (NYSE: JMIA)


Jumia was founded in 2012 by Jeremy Hodaraand, Sacha Poignonnec, both ex-McKinsey consultants along with Tunde Kehinde and Raphael Kofi Afaedor. It was originally launched in Lagos, Nigeria and was present in 18 countries by 2018.


e-Commerce market in Africa is set to rise by 15.5% a year between 2020 and 2025. Sales reached $ 19.9B in 2020 and will reach $ 40.1B by 2025 as user penetration increases from 24% in 2020 to 39.5% in 2025. McKinsey & Company even sets this number at $ 75B by 2025.

Attractive numbers! But what is really driving this?

  • Internet Penetration

    Currently there are 272m mobile internet users in Sub-Saharan Africa. Representing a 26% penetration rate. This is set to grow to 475m users by 2025. Good for a 39% penetration rate and a CAGR of 10%.

    SIM connections will also increase to 1.05B up from 816m today, with a penetration rate increasing from 77% to 86%. All the while, internet penetration is already above 70% in North Africa.

  • Percentage of Unbanked People

    The share of unbanked population might be as high as high as 60% according to certain figures.

    However, users can now use banking services through their smartphones as the total transaction value through mobile phone increased by around 25% in Africa in 2019.

  • Disposable Income

    Africa is not standing still as population and income per capita are increasing. Driven by large urbanisation rates as productivity is 3 times as high in cities as in rural areas.

    The World Economic Forum projects consumer spending in Africa to reach $ 2T by 2025 up from $ 1.3T in 2015. Furthermore, according to Landry Signé from the Brookings Institution:

    “At present, the middle class accounts for roughly one-third of the region’s population, but it is expanding so quickly that total consumer expenditure is expected to double by 2020”

  • Reliability of Postal Service

    This is still a key weakness for the development of e-commerce in Africa. As MercadoLibre is doing in Latin America, e-commerce players have to build their own logistics service. However, smart solutions can greatly help as reported by Nicolas Goldstein:

    “Nigerian Post Service, has remedied the approximation of mailing addresses by using What3words. It is a GPS service that divides the world in squares of 3m x 3m and that attributes 3 words to each square. Nipost is consequently better prepared for mail and parcel deliveries.”

    Furthermore, international logistics company are not standing still as DHL has expanded to serve 34 African countries.

This market is moving upwards and supported by strong underlying fundamentals such as population growth, rising internet penetration and increasing urbanisation which on its turn increases productivity and disposable income.

Question is now how we can get a share of this market? Let’s review the key players:

  • Jumia has 8.5m website visits in Nigeria only (one of their biggest market) down from 9.5m in May 2020

  • Konga (from Nigeria) has 1.7m visits stable since May 2020

  • Takealot (from South Africa) has 10.6m website visits down from 12m in May 2020

Jumia looks interesting, here is a quick look at its numbers.


  • Gross Merchandise Value was down 28% YoY to € 187m for Q3 ’20. On the other hand, gross profit increased by 22% to € 23.2m - after fulfilment this comes down to € 6m in profit up from a loss of € 1.7m a year earlier.

  • Sales and Marketing expenses of € 6.2m, a YoY decrease of 55% and lowest since 2017. Sales & Advertising expense of € 0.9 per order down from € 2 one year ago. This creates an operating loss that reached a 3-year low of € 28m, decreasing 49% YoY.

  • JumiaPay’s Total Payment Volume reached € 48m, a YoY increase of 50%.


It is fair to say, this story is not an easy one. e-Commerce in Africa is meant to boom but here we have a leading player that saw its sales decrease in the middle of a large pandemic.

However, this is not a reason to discard Jumia. The numbers show that they did not try to boost sales but rather improve their operations. First, they improved their gross margins by changing their product-mix:

“The business mix rebalancing initiated late last year has increased our exposure to everyday product categories and, combined with enhanced promotional discipline, supported unit economics.” - Q3 Results

Second, they cut down operating expenses by rationalising marketing expenses and improving their logistics:

“In addition, we made multiple enhancements across our logistics and marketing operations that led to a decrease in fulfilment and marketing expenses for the third quarter of 2020 by 20% and 55% respectively, on a year-over-year basis.” - Q3 Results

On top of that, they continued to expand their JumiaPay solution as they launched a pilot in Egypt to offer pre-paid physical and virtual card. This is in partnership with Mastercard and ADIB, a leading bank in the Middle East & North Africa region.

Finally, Jumia launched a pilot for Jumia Games in partnership with Mondia, a marketing and digital content distribution company. These games offer a subscription based service with unlimited access to over 500 games that include in-app purchases.

“The gaming industry is expected to grow at a CGAR of 12% until 2025 and with more than 200 million Africans who are below the age of 35, the continent has tremendous potential in the mobile gaming segment” - Dr Amadeo Rahmann, CEO of Mondia


  • Investing in Jumia is inherently risky. Investors are buying a company that is in the midst of a turnaround while loosing cash at a very fast pace

  • An investment is motivated by the very strong market growth as population grows, urbanisation levels increase, internet becomes widespread and disposable income rises

  • If Jumia succeeds its turnaround, the reward could be high as it is still valued at around $ 3B today. This is only a sliver of the valuation more established players command

  • We do not expect the larger international e-commerce players to fight for the African market in the short to medium term as there are easier and more profitable market requiring less investments that these giants could pick first

We have a speculative position in Jumia (15% of full position) and will seek to increase if they manage to grow their sales again while keeping operating expenses in check next quarter.

Sources and credits

  • Investor presentation

  • Company website

  • Allied Market Research

  • Frost & Sullivan

  • Markets And Markets

  • Research And Markets

  • McKinsey & Company

  • TechCrunch

  • Forbes

  • Fortune

  • Merchant Maverick

  • GSMA

  • TechPoint Africa

  • Brookings

  • World Economic Forum

  • CGTN Africa


The markets are nervous and we are moving fast. While you were away we have increased our stake in some of our positions which are not included in the “10-Stocks Portfolio”.

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Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.


The author has no business relationship with any company mentioned in this article and the author is not receiving any form of compensation for this article other than contributions from paying subscribers.

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Please note that our portfolio returns have not been audited by any external or third party. These are not not intended to serve as the basis for any investment decision or purchase. All investments involve risk and the past performance of a security or financial product does not guarantee future returns.