We came across a bullish thesis on Alico, Inc. (ALCO) on Value Degen’s Substack by Unemployed Value Degen. In this article, we will summarize the bulls’ thesis on ALCO. Alico, Inc.’s share was trading at $26.02 as of Oct 23rd. ALCO’s trailing P/E was 7.63 according to Yahoo Finance.
A team of packing house workers packaging specialty citrus for customer orders.
Alico Inc. (ALCO), the largest publicly traded citrus grower in Florida, with 48,000 acres of citrus groves spread across seven counties, is undergoing a transformation as it navigates challenges in the citrus industry and seeks to unlock value from its substantial land holdings. The Florida citrus industry has been in decline since the introduction of the Asian citrus greening virus in 2005, which has infected 80% of the state’s citrus trees, leading to significant drops in crop yields. In 2003, Florida produced 240 million boxes of oranges, but by 2023, that figure had plummeted to 18 million due to the virus and hurricanes like Ian in 2022 and Milton in 2024. Despite these setbacks, ALCO has maintained crop insurance and, importantly, sustained no tree deaths from recent storms. However, the extent of fruit loss due to hurricane Milton remains uncertain.
ALCO’s management has been optimistic about recovery, pointing to innovations such as antibiotic injections for infected trees, though their long-term effectiveness is still unknown. The company’s production has been slowly recovering, with replanting efforts increasing its productive acreage to 36,000 acres in 2024. ALCO expects a return to full production by 2025, barring further hurricane damage, and management believes the company’s new offtake agreement with Tropicana could boost prices by 30% to 50%.
Financially, the company generated $105 million in revenue from citrus in 2021, with $14.5 million in net income. If normal production levels return in 2025, ALCO’s citrus revenue could reach $150 million, with net income rising to $20 million. Although earnings may seem modest for a company with a $200 million market cap, ALCO’s agricultural land holds significant value. Its citrus land is worth between $400 million and $500 million, suggesting a strong upside if the company were to sell its holdings and distribute the proceeds to shareholders, offering a potential return of 48% to 85%.
In addition to its citrus business, ALCO is working to rezone its agricultural land for residential development, with its prime 4,500-acre parcel near Naples and Fort Myers already in the process. ALCO has previously developed and sold off cattle ranches, using proceeds to reduce long-term debt from $230 million in 2015 to $75 million today. As the company pivots toward returning capital to shareholders, patient investors stand to benefit from both the rebound in citrus production and the long-term value of ALCO’s land development strategy. However, management’s ability to execute on these promises remains to be seen.
Alico, Inc. is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 4 hedge fund portfolios held ALCO at the end of the second quarter which was 3 in the previous quarter. While we acknowledge the risk and potential of ALCO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.