Bear of the Day: Jamba (JMBA)

Jamba Inc. (JMBA) is once again a Zacks #5 Rank and this will mark the fourth occasion I've written about this fact, first when shares were above $17 and most recently in November when they were above $13. But this has nothing to do with the tastiness or quality of their healthy beverage offerings.

Remember, the Zacks Rank is a purely quantitative model that compares the earnings momentum, based on analyst EPS estimate revisions, of over 4,000 stocks every day.

So for a stock to become a top-ranked Zacks #1 -- and only the top 5% of stocks can do so -- the agreement among analysts and the magnitude of their upward revisions must be sufficiently positive.

Conversely, for a stock to become a bottom-ranked Zacks #5 -- again, only the bottom 5% of stocks get this punishment -- the agreement among analysts is still important and it's the EPS estimates that will be found taking a turn for the worse.

To see why Jamba has become a Zacks #5 Rank so frequently, you need only look at the proprietary Price & Consensus chart to see the repeating pattern of estimates being lowered each year...

Specifically, 2016 full-year EPS estimates have dropped from $0.52 to $0.45 in the last 60 days. This represents 170% annual growth in profits, but that's compared to that downward sloping blue line. Not a pretty picture of "growth."

Here's what I said in November when shares were trading above $13...

Jamba may have a bright future. The stock of this $200 million company certainly hasn't cratered to oblivion and merely trades in a big range these past few years between $10 and $17. But until the estimates turn back upward, I'd put my money on shares visiting the lower end of that range before the upper end.

Last week, JMBA made a new 18-month low under $11.50. Maybe the stock is bouncing off the bottom of its big range with an exciting new CEO coming onboard. David Pace comes from Bloomin' Brands (BLMN) and also had held executive positions at Starbucks (SBUX), PepsiCo (PEP), and Yum! Brands (YUM).

Plus the stock has 30% short interest that makes it "ripe for a squeeze." But I'm still waiting for the estimates to stop going down before considering that juicy play.

Kevin Cook is a Senior Stock Strategist for Zacks where he runs the Follow The Money portfolio.
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