Jamba Juice: The Worst Already Factored In

Sometimes a confluence of events serves to provide investors with a bountiful windfall or a demoralizing defeat. Often times the same series of events will produce both effects dependent only on which side of the trade one is on. That may be what has happened in the case of Jamba Juice (JMBA).

In the past six months Jamba's stock has swooned from $8 a share in September to close Wednesday at $2.76. Several factors contributed to the freefall. Last month the company reported fourth quarter and fiscal year 2007 results to the disappointment of the street. Analysts called for revenue to measure $64 million for the quarter and $327 million for the year. Jamba reported $54.5 and $317.1, respectively. The stock lost 15% in the session following the announcement.

Jamba Juice has continued to languish, shedding another 10% over the last several weeks. A downgrade, by a Wedbush Morgan analyst, and the general fears of recession which have hung over the market in early 2008 bear some of the blame. But, looking over the numbers, I've come to wonder if the street hasn't overreacted somewhat.

At these levels Jamba Juice trades at just a .5 price to sales ratio using numbers from the prior twelve months. That's downright cheap, especially for an outfit sitting on $44.5 million and carrying zero debt. And though revenues did not meet expectations, the company still delivered an 18% increase over 2006 sales.

While the current economic environment does not favor the company, the worst is already factored into the current price. In the event of a sustained recession, Jamba Juice would likely suffer. However, with $0.85 a share in the coffers, how much lower could the sale price recede?

Certainly economic conditions will improve in time. For investors with a considerable time horizon, Jamba Juice may prove an intriguing value.

Disclosure: I do not own shares in any of the companies mentioned.

Comments

[whatajoke]

Maybe you should factor in their $180 million in operating leases before saying they have no debt, and that they are heavily concentrated in California, one of the states with the worst housing environments in the country.

As they continue reporting poor earnings, their cash balance is going to dry up and they will not be able to pay these leases, and probably go bankrupt.

[rlxdoc]

JMBA has a complicated reporting structure that makes it difficult to analyze. Hopefully with the K we will finally get to some clarity about year over year trends. The lease debt a lot higher than $180m, but remember leases are both liabilities and assets. The lease debt is not out of line with sales.

Comps are weak, but not a disaster. California has a boom/bust economy, and although the housing market is awful, I don't see how that will impact the average JMBA customer (who is younger on average and more likely a renter).

Restaurants & retail in general do not go bankrupt easily, and lots of debt is required to push them over the edge. This seems unlikely in this case. At this rate losses would have to continue for 4 or 5 years before they'd work through the cash. Bottom line is that it is cheap, but there isn't any near term reason to own this one.

[mkreisel]

Cheap alone doesn't make it attractive. Just because it can't go lower doesn't mean it will go up. I have 1000 shares bought at 3, but I don't see the need to add more until earnings start get better.

[User 156170]

Ibought 5oo at 4 and then 1500 @2.80 but it seems like wal street has lost its faith in Jamba.Company has to really preform well to get noticed.Iam sitting with fingers crossed

[anastos]

Look, this isn't going to be a short term story. If anything, in the next 12 to 18 months, we'll see comps get better and some revenue from their recent licensing deal with Nestle. Until then, I'll get a smoothie and add some vodka in there to make me forget how much of this junk I own.