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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.