2 Stocks Headed for a Turnaround

Everyone loves a good comeback story. But investors are the ones who can really harness the power of a corporate turnaround. Picking up shares of a solid company whose stock has fallen sharply for one reason or another can lead to attractive returns. Below are two stocks that I believe have what it takes to regain strength in their respective industries.

Bringing the juice
(NAS: JMBA) juice is a fresh juice and smoothie retailer that has struggled in recent years with falling revenue. Increased competition from McDonald's (NYS: MCD) and Starbucks (NAS: SBUX) create a challenging environment for the fruitful hopeful. McDonald's now offers smoothies from its McCafe menu, while Starbucks is jumping into the business through its recent purchase of the juice company Evolution Fresh for $30 million. Still, for serious smoothie drinkers, Jamba serves up a much wider selection of frozen fruit drinks than either McDonald's or Starbucks.

Despite tough competition in the smoothie space, Jamba is improving its margins by introducing new products. One of the ways the company is adding higher-margin items to its menu is with its new Fit 'n Fruitful smoothie platform. These all-fruit concoctions, which are sold as meal replacements, complement Jamba Juice's other healthy offerings, including its Probiotic Fruit and Yogurt Blends and steel-cut oatmeal cups.

Jamba also expanded its products to include specialty teas last month when the smoothie maker acquired Talbott Teas for an undisclosed amount. It's still a bit soon to tell, but Jamba's foray into teas could be a game changer for the smoothie company. Aside from the occasional post-gym snack, most people don't drink smoothies during the winter months. However, throw in a selection of loose-leaf organic teas, and you give customers a reason to walk through your doors whatever the weather -- I can raise a pinkie to that.

Drink to good health
Those efforts are already bearing fruit. In its latest earnings report, Jamba posted a fifth straight quarter of positive company-owned same-store sales growth. Additionally, Jamba is accelerating its growth overseas. The company's international franchise operators successfully opened 18 stores last year, and they plan to continue expanding in the year ahead.

If Jamba sticks closely to its current plans, I see this playing out well. Still, Jamba needs to redefine itself as a recognizable brand and not just a product, which is no easy task.

Banking its way to success
eBay (NAS: EBAY) also shows good prospects of a turnaround. The e-commerce company is clawing back to the heights of profitability it once enjoyed through its online auction business.

It's been a slow climb for the company, but eBay should be able to capitalize on its strong position in the mobile commerce area through its PayPal business. In 2011, PayPal processed $4 billion in mobile payments, up from $750 million a year earlier. I think eBay's online payments unit will continue to expand as more global consumers use their smartphones and tablets to make purchases online.

Additionally, eBay has aligned itself with the U.K. mobile carrier Three in a deal that will bring eBay's payment apps to all Android phones sold by the U.K. company. Another strategic partnership with Spain's top ticketing company Entrada allows users to purchase concert tickets using their mobile phone and PayPal. Last year, Entrada.com sold more than 50 million tickets in Spain. According to PayPal, since the service became available on Entrada.com a few weeks ago, more than 15% of customers are already choosing to use PayPal to purchase tickets on the site.

Another smart move by eBay was the addition of BillSAFE, which is the leading provider of purchase-on-invoice payments in Germany. BillSAFE allows merchants to bill customers after they've already received the products. eBay has a similar PayPal service in the U.S. known as Bill Me Later, so the BillSAFE acquisition adds another layer to its dominance in the payments space.

Three, two, one... auction
Meanwhile, the company's marketplaces business is growing through the use of mobile devices. eBay expects to earn $8 billion this year in mobile retail sales, up from $5 billion in 2011. A recent report from Nielsen explains that by combining mobile Web and apps, eBay along with four other top retailers' sites successfully reached 60% of smartphone users.

The company is building its online marketplace to compete in a mobile society -- what could be smarter? For added impact, eBay's PayPal unit adds stability to an otherwise volatile business model. PayPal is a familiar name that consumers trust, which is why I'm drinking the eBay-PayPal Kool-Aid and giving this stock a three-year outperform rating on my profile in Motley Fool CAPS.

Turn it around
Picking up on turnaround stories can give you great returns. Not all companies that are plagued by poor performance manage an about-face, but I'm optimistic about eBay's and Jamba's chances.

But if you're not yet ready to jump into one of these troubled companies, I encourage you to read this free report instead: "3 Stocks That Will Help You Retire Rich." This free research report is packed with expert advice from The Motley Fool's leading analysts and reveals three stocks you can't afford to miss. Click here to get it now -- it's free.

At the time thisarticle was published Foolish contributor Tamara Rutter does not own shares of any companies mentioned in this report. Follow her on Twitter, where she uses the handle @TamaraRutter, for more Foolish insights and investing ideas. The Motley Fool owns shares of Starbucks. Motley Fool newsletter services have recommended buying shares of Starbucks, eBay, and McDonald's, as well as writing puts on eBay and writing covered calls on Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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