In January, I made a bearish underperform CAPScall on Teavana
Teavana shares have dropped considerably since the company went public last summer. Its most recent spill related to first-quarter earnings, which missed analysts' estimates. Teavana's net income increased 6% to $3.5 million, or $0.10 per share. Revenue increased 27% to $44.3 million, and same-store sales increased 1.7%.
Granted, Teavana shares deserved the drubbing. These are not torrid results from a company whose stock was previously priced for high growth. These figures are fairly decaf, in fact.
Still, Teavana's shares' descent to a historical low (as short as that trading history may be) represents a much better opportunity for investors who believe in the company's story. Part of the investment thesis is that tea is an underserved market here in the U.S. According to Teavana's IPO prospectus, the global market for tea represented $56.6 billion in sales in 2009, and the American market only made up 9% of that market.
Right now, Teavana's trading at 17 times forward earnings, far cheaper than when I looked at it in January; it was trading at 31 times forward earnings then. For lack of a better publicly traded comparison, I'd throw Starbucks
Still, Teavana's no "third-place" hangout cafe. Teavana provides premium loose-leaf teas, artisanal tea accoutrements, and other tea-related merchandise in the company's mall-based stores. It competes with indie tea shops and the formidable range of teas that are available in supermarkets. Hain Celestial's
Green Mountain Coffee Roasters
Teavana aims to craft a "Heaven of Tea" retail experience, and its sales force is comprised of so-called "teaologists." So maybe in a sense it more strongly resembles lululemon athletica
The fact that Teavana has no real clear-cut competitor actually strikes me as one of its advantages, if it really can convince droves of consumers to buy its high-end teas at American malls. This is no easy feat. Americans adore their high-powered coffee, and the macroeconomic climate isn't exactly sympathetic to discretionary splurge spending right now.
Still, given Teavana's shrinking multiple, the idea's brewing that it's time to turn more bullish and end my underperform CAPScall. You can see my overall CAPS track record here. What do you think of Teavana? Pour out your opinion in the comments box below.
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