Can Jamba Triple From Here?
Oct 3rd 2012 10:42AM
Updated Oct 3rd 2012 10:52AM
Jamba (Nasdaq: JMBA ) has languished as a growth stock over the years. Can it find new life among value investors?
Shares of the smoothie chain operator soared 6% yesterday after Khaner Capital's Lloyd Khaner praise the Jamba Juice parent at the Value Investing Congress.
Khaner sees potential in Jamba as the new management team has emphasized growth through refranchising efforts that hand over company-owned stores to royalty-paying franchisees. The management team in place when the company first began trading publicly seven years ago favored a debt-saddling strategy of breakneck expansion with company-owned stores.
Khaner is excited about Jamba's prospects as it expands its menu offerings beyond smoothies to transform the company into a true wellness brand. The push into school cafeterias longing for healthy premium options is also starting to pay off.
Yes, there are plenty of places cranking out fruit smoothies these days.
Burger King Worldwide (NYSE: BKW ) became the latest fast-food player to enter this game later this year, enlisting David Beckham in ads promoting the new premium beverage offering. McDonald's (NYSE: MCD ) and Starbucks (Nasdaq: SBUX ) have also embraced the smoothie craze.
However, drive-through convenience at lower price points by the fast-food chains hasn't slowed Jamba. Comps have been running positive for eight consecutive quarters at franchised-owned locations, coinciding with the arrival of smoothies on McDonald's McCafe menu.
Khaner likes what he sees. Jamba may only be seasonally profitable now, but that is changing. He sees the company earning $0.50 a share come 2015, making his target price of $7 appear reasonable at 14 times earnings.
The stock has already been a big winner this year, soaring 82% so far in 2012. Hitting Khaner's target of $7 would result in the stock nearly tripling over three years, a healthy return no matter you blend it.
Blended just right
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