We came across a bullish thesis on Alico, Inc. (ALCO) on Substack by Tyler Moody. In this article, we will summarize the bulls’ thesis on ALCO. Alico, Inc. (ALCO)’s share was trading at $29.37 as of Feb 28th. ALCO’s trailing P/E was 8.75 according to Yahoo Finance.
A team of packing house workers packaging specialty citrus for customer orders.
Alico (ALCO) reported a 20% year-over-year revenue increase in the first fiscal quarter of 2025 but posted a net loss of $9.2 million, or $1.20 per share. Stockholder equity declined by $10 million compared to the prior year, continuing a downward trend due to ongoing losses. The company reaffirmed its plan to sell $20 million worth of land this year, with proceeds from these sales and the upcoming Valencia harvest expected to sustain operations through fiscal 2027. However, total harvest volume declined 12.5% year-over-year, reflecting broader challenges in the citrus business. While an improved contract with Tropicana helped offset some of the volume shortfall with stronger pricing, management remains cautious, anticipating a lower total harvest compared to last year.
Alico’s earnings call did not offer many new insights, reinforcing the company’s commitment to exiting the citrus business and shifting focus toward monetizing its land holdings. The CEO reiterated previous comments on the company’s long-term strategy, emphasizing that land sales are the primary driver of value creation. With total stockholder equity now at $247 million, Alico’s book value stands at $32.36 per share. Valuing the stock at 1.5 times book value results in an estimated share price of $48.50. However, the true underlying value of Alico’s assets may be significantly higher. The CEO has previously stated that the present value of Alico’s land holdings falls between $650 million and $750 million.
A more detailed valuation of Alico’s 53,400 acres suggests the agricultural land alone could be worth approximately $480 million, assuming a conservative estimate of $9,000 per acre. The company’s investor presentation further segments the land into three categories: 5,500 acres of near-term development land valued at $350 million ($63,600 per acre), 7,100 acres with long-term development potential at $160 million ($22,500 per acre), and 40,770 acres of agricultural land at $185 million ($4,500 per acre). When incorporating these estimates into the balance sheet, Alico’s net asset value comes out to roughly $75 per share, presenting a substantial discount relative to its current market price.
Unlocking this value, however, is a long-term process that may take years, requiring patience from investors. Despite the near-term earnings volatility and operational challenges, Alico’s land holdings provide a significant margin of safety, and management’s strategy to focus on land monetization remains intact. Given the disconnect between market price and intrinsic value, holding the stock remains a compelling opportunity.
Alico, Inc. (ALCO) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 1 hedge fund portfolio held ALCO at the end of the fourth 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 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.