Can Jamba, Inc. be the next Starbucks?
Jamba Inc. (JMBA): The first time we came cross JMBA, we were struck with the company’s ability to sell grass juice for $5.00 a cup (of course, I'm joking a bit here). As far as we can tell, no other company that has been able to successfully market such product this well. Of course, JMBA is not only about grass juice, the company actually sells great smoothies. In many ways, JMBA is very similar to Starbucks. Before Starbucks coffee came along, spending more that 50 cents for coffee was unusual. Similarly, spending more than a buck fifty for a cup of smoothie would be unheard of. The popularity of JMBA has been growing in the West Coast. We believed it will continue to grow across the country given ample time.
In our view, believed JMBA is among the companies with real potential. While last quarter’s number were far from impressive, this is to be expected as the company is in the midst of an aggressive growth plan. Trading below $10 per share, we believed JMBA have all the ingredients to be the next Starbucks. If you visit any JMBA stores, you will notice the lines. The place is always packed with customers. We believed the trend towards organic products and the perception these smoothies are healthy should fuel the growth of JMBA.
The most obvious risk to JMBA is the low barrier to entry. It does not take much to setup a smoothie shop. Another potential issue is JMBA might only do well in certain parts of the country. The primary reason JMBA is popular in the West Coast, particularly California is because of the weather and the overall lifestyle out in the West. JMBA might have issues expanding into the Mid-West where high price smoothies might not be in demand.
When investing in this type of company, investors should take a long term approach. This is not one of those stocks that will go up 40% in a single day, but if you have the patience, we believed JMBA is a great long term investment. The worse case scenario for JMBA is being acquired by another company if the company is unable to grow as planned. Given the brand has been growing strong; it is unlikely this company will simply disappear. Our 12 months target for JMBA is $14 per share. It is currently trading at around $9.63 as closed of March 23, 2007.
Comments
hey,
what dou think is the best value for this stock ?
Posted by: beginner investor | October 18, 2007 11:01 PM