Jahez, the Saudi food delivery and lifestyle platform, reported a strong jump in second-quarter revenue, but that wasn't enough to keep its broker onside. United Securities cut the stock to a sell rating and lowered its target price to SAR 11, citing a much bigger-than-expected quarterly loss.
The company's revenue rose 34.5% year over year to SAR 763 million, beating the broker's estimate by about 22%, thanks to higher order volumes. But the bottom line told a different story: Jahez posted a net loss of SAR 22 million for the quarter, versus United Securities' forecast for a loss of just SAR 1 million.
Why the loss matters more than the sales beat
For investors, the gap between revenue growth and profitability is the key takeaway. Jahez is spending heavily to grow its platform—expanding into new services like grocery delivery and quick commerce—and that spending is weighing on margins. United Securities' note, released on Sunday, said the bank's main concern was that sales profit margins disappointed, even as order volumes surged.
This is a common pattern for fast-growing tech platforms: they often prioritize market share over short-term profits. But the market's reaction shows that investors and analysts are starting to focus on when the company will actually turn a sustainable profit, not just how fast it can grow.
The sell rating and target cut come after Jahez's shares had already been under pressure. The new target of SAR 11 implies a significant downside from recent levels, according to the broker's assessment.
Context: Jahez's position in Saudi Arabia's delivery market
Jahez is one of the leading food delivery apps in Saudi Arabia, competing with international players like HungerStation (owned by Delivery Hero) and local rivals. The company went public on the Saudi stock exchange (Tadawul) in late 2021, riding a wave of investor enthusiasm for tech stocks in the region.
Since then, the company has expanded beyond restaurant delivery into areas like grocery and pharmacy delivery, aiming to become a broader "lifestyle" platform. That expansion requires significant investment in logistics, marketing, and customer acquisition—costs that are now showing up in the bottom line.
The Saudi market itself is growing, with more consumers ordering online and a young, tech-savvy population. But competition is intense, and margins in delivery are notoriously thin. Companies often have to offer discounts and promotions to attract and retain users, which eats into profitability.
What it means for investors
For everyday investors, the Jahez story is a reminder that revenue growth alone doesn't make a stock a buy. A company can post impressive top-line numbers while still losing money, and analysts will punish that if the losses are worse than expected.
United Securities' move also highlights how a single earnings report can change the narrative. The bank had previously been more optimistic, but the bigger-than-expected loss forced it to reassess. This is a normal part of the investment process—analysts update their views as new information comes in.
Investors holding Jahez shares should watch for a few things in the coming quarters: whether the company can narrow its losses, how its order growth evolves, and whether it can improve its profit margins. The company's ability to balance growth with profitability will be key to winning back analyst confidence.
It's also worth noting that this is not an isolated case. Other tech and growth companies in the region and globally have faced similar scrutiny when their spending outpaces their earnings. For example, Saudi IT firm Solutions recently beat forecasts and saw its target raised, showing that the market rewards companies that deliver on both growth and profit.
In contrast, Jahez's experience shows the flip side. The company's sales beat was overshadowed by the loss, and the stock rating now reflects that reality.
The bottom line
Jahez's second-quarter results were a mixed bag: strong revenue growth, but a much larger-than-expected loss. United Securities' decision to cut the stock to sell and lower its target price to SAR 11 is a clear signal that the market's patience with loss-making growth may be wearing thin.
For investors, the key question is whether Jahez can eventually convert its scale into profits. Until then, the stock may remain volatile, and analysts may continue to adjust their ratings based on quarterly results.
As always, it's important to do your own research and consider your own financial situation before making any investment decisions. This article is for informational purposes only and is not a recommendation to buy or sell any security.
