Why Jamba Shares Got Crushed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Jamba Juice (NASDAQ: JMBA  ) plummeted 19% today after the fruit smoothie chain slashed its outlook for 2013.

So what: Jamba shares have rallied nicely over the past year on steadily improving same-store sales, but yesterday's downbeat guidance reignites serious concerns over its ability to grow profitably. While the news wasn't all bad (Jamba also announced that retail giant Target will be rolling out 1,000 JambaGo locations), management's disappointing outlook for sales, four-wall profit margins, and operating earnings suggests that Jamba's competitive position is rapidly weakening.

Now what: Management now expects same-store sales to increase no more than 1% in 2013, well below its prior growth forecast of 4% to 6%. "Jamba's adjusted targets for 2013 and preliminary forecasts for 2014 represent a realistic and balanced approach to achieve sustained, long-term growth and also drive significant gains this year in operating margin, net income and other key metrics," Chairman and CEO James White reassured investors. Of course, when you couple Jamba's intensifying competitive environment with the stock's forward P/E of 17, I'd wait for an even wider margin of safety before buying into that bullishness.

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