Starbucks Corporation (NASDAQ: SBUX) is rising in pre-market trading after reporting higher revenues thanks to China, a successful promotion on Living Social and attention to costs but do potential small cap competitors or alternatives to the Starbucks caffeine fix like Caribou Coffee Company (NASDAQ: CBOU), Teavana Holdings (NYSE: TEA) and Jamba (NASDAQ: JMBA) offer anything for investors? After all, Starbucks Corporation may have had a great quarter but its probably close to reaching the saturation point (at least in the USA) when it comes to the number of locations it has. With that in mind, could small cap stocks like Caribou Coffee Company, Teavana Holdings and Jamba offer a better fix for investors? Here is a quick look:
Caribou Coffee Company (NASDAQ: CBOU) Recently Blamed Green Mountain Coffee Roasters For Lower Results
Caribou Coffee Company has 581 coffeehouses, including 169 franchised locations, located in 20 states as of the beginning of the year. On Thursday, Caribou Coffee Company rose 0.35% to $12.03 (CBOU has a 52 week trading range of $9.93 to $18.84 a share) for a market cap of $244.52 million plus the stock is down 13.8% since the start of the year and up 85.1% over the past five years. Caribou Coffee Company is scheduled to report earnings on November 8th and the last time the company reported earnings, it missed revenue estimates and lowered its full-year revenue and earnings forecast. What was unusual was the fact that Caribou Coffee Company blamed Green Mountain Coffee Roasters (NASDAQ: GMCR) or specifically “a lower contribution from the Keurig single-serve platform.” Moreover, Starbucks Corporation executives touted expected holiday revenue from sales of its the Verismo, a single-cup home-brewing machine, when it reported earnings – meaning Caribou Coffee Company will to find another fix to replace more lost revenue.
Teavana Holdings (NYSE: TEA) Is the Second Most Shorted Stock on the NYSE
Teavana Holdings is a specialty retailer of loose-leaf teas, authentic artisanal teawares and other tea-related merchandise with over 200 Teavana locations throughout the US and Mexico. Hence, its really trying to be the Starbucks Corporation of tea which is arguably a healthier beverage than coffee. On Thursday, Teavana Holdings rose 1.04% to $10.66 (TEA has a 52 week trading range of $10.27 to $26.03 a share) for a market cap of $411.40 million and way off from its August IPO price of $17. Teavana Holdings raised nearly $121.4 million and shares rose 64% to $27.80 on their first day of trading but since then, the shorts have piled into the stock. In fact, Teavana Holdings is the second most shorted stock on the NYSE with short interest of 72.90%. One reason for that was due to the fact that the last time Teavana Holdings reported earnings, it reported a 38% revenue increase to $43.1 million and a net loss of $146,000 verses net income of $1 million due to its Teaopia acquisition. However, gross margins were under pressure and Teavana Holdings’ repeat customers tend to go for the beverage (which is a lower revenue contributor) rather than the expensive tea babbles. Nevertheless and if you are a true tea aficionado, you will probably go for a tea offering from Teavana Holdings rather than Starbucks Corporation’s Tazo tea offerings. Likewise, investors should note that Teavana Holdings has a forward P/E of 14.41 verses Starbucks Corporation’s 21.89.
Jamba (NASDAQ: JMBA) Is Rising in Pre-Market Trading After Reporting Earnings
Jamba is a restaurant retailer of healthy food and beverage offerings that include fruit smoothies, fresh squeezed juices, Iced Fruit Tea Infusions, Hot Blends organic tea lattes, hot teas, oatmeal made with organic steel cut oats, wraps, salads, sandwiches, California Flatbreads and a variety of baked goods and snacks. All told, there are some 788 store locations globally, consisting of 301 Company-owned and operated stores and 454 franchise-operated stores in the USA and 33 international stores. On Thursday, Jamba rose 1.83% to $2.23 (JMBA has a 52 week trading range of $1.23 to $2.94 a share) for a market cap of $151.74 million (SBUX is up 70.2% since the start of the year but down 60.9% over the past five years) and the stock was rising in pre-market trading. That’s in part because Jamba reported a 14.7% revenue increase to $65.5 million while net income was flat at $4.1 million. However, Jamba also reported that company-owned comparable store sales rose 3.9%, franchise-operated comparable store sales rose 1% and system-wide comparable store sales rose 2.5% plus the company has gotten a $10 million increase in its credit agreement. Nevertheless, Jamba does have a rather high forward P/E ratio of 24.78.
The Bottom Line. Investors searching for a small cap alternative to Starbucks Corporation (SBUX) might want to skip over Caribou Coffee Company (CBOU) and take a cautious closer look at Teavana Holdings (TEA) and Jamba (JMBA).