We came across a bullish thesis on Alico, Inc. (ALCO) on Undervalued and undercovered’s Substack by Hugo Navarro. In this article, we will summarize the bulls’ thesis on ALCO. Alico, Inc. (ALCO)’s share was trading at $27.80 as of Dec 6th. ALCO’s trailing P/E was 30.55 according to Yahoo Finance.
Alico, Inc., a Florida-based producer of oranges, presents a compelling investment opportunity rooted in two transformative value drivers: the turnaround potential of its citrus business and the strategic monetization of its extensive land holdings. Despite facing significant challenges, including citrus greening disease, hurricane damage, and inflationary pressures, the company’s vast land assets and improving citrus dynamics create a foundation for long-term value creation.
Alico owns approximately 53,371 acres of Florida land, with historical sales and regional growth trends suggesting its value significantly exceeds the company’s current enterprise value of $300 million. Florida’s rapid population growth, rising demand for real estate, and the scarcity of developable land have driven farmland values upward, with an annual appreciation of 6.6% over the past two decades. Alico is preparing to sell a valuable 4,500-acre parcel in Collier County, which could catalyze a reevaluation of its undervalued stock. This land asset not only offers downside protection but also positions Alico as a unique play on Florida’s booming real estate market.
On the citrus front, Alico has faced substantial production declines due to hurricanes and the devastating impact of citrus greening disease. However, innovative treatments, such as oxytetracycline injections, along with new tree plantings, suggest the potential for a significant recovery. Improved pricing contracts with major buyers like Tropicana, coupled with reduced imports and tariffs on foreign oranges, create favorable market conditions. With a 20% increase in tree count and maturing groves expected to reach peak production by 2026-2027, Alico’s citrus output could rebound to 8-10 million boxes annually, translating into meaningful revenue growth. Higher orange prices and operational efficiencies could drive annual profits of $23.5–$53.25 million before taxes.
Alico’s competitive advantages, including its scale as Florida’s largest orange producer, strategic land holdings, and deep industry expertise, further enhance its investment appeal. Management’s alignment with shareholder interests, evidenced by incentives tied to ROIC and share price, underscores a commitment to unlocking value through dividends, buybacks, or strategic sales.
The company’s unique combination of appreciating land assets and a recovering agricultural business offers a rare low-risk, high-reward profile. While uncertainties persist in citrus production, any success in monetizing land holdings or revitalizing orange operations could position Alico for substantial upside, making it a standout opportunity among undervalued companies.
Alico, Inc. (ALCO) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 3 hedge fund portfolios held ALCO at the end of the third quarter which was 4 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 ALCO 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.