The agriculture industry is fertile ground for investors, especially as the world braces for a population nearing 10 billion by 2050, according to UN estimates. While steady demand is one reason to consider investing in the agriculture space, buying into food stocks can also help to serve as a buffer against inflationary pressures.
Among agriculture stocks, rising demand for healthy and sustainable food options is driving particularly robust expansion for certain segments of the market. Take, for example, the global avocado market, which is on a trajectory to surpass $19 billion by 2026, roughly double its 2021 size.
For investors looking to tap into the agriculture space, here's a closer look at two top stocks with a sizable footprint in the avocado market that analysts expect to rally substantially from their current under-$20 price levels.
1. Limoneira Company Stock
Limoneira Company (LMNR), valued at $327 million by market cap, has carved out a niche for itself with a focus on sustainable and innovative farming practices. The California-based company is the largest U.S. grower of avocados, a leading producer of lemons and other specialty citrus, and Limoneira has also ventured into real estate development, leveraging its vast land holdings to meet the growing demand for residential spaces for its agricultural workers.
On the charts, LMNR is up 18.5% over the past 52 weeks to trade around $18 per share.
With a quarterly dividend payment set at $0.08, LMNR stock also offers shareholders a yield of 1.65%.
Shares of Limoneira spiked higher in early December after management said it has initiated a process to explore potential strategic alternatives, which often indicates a potential sale of the company is under consideration.
Later in the month, LMNR also topped revenue expectations with its Q4 earnings report. While the adjusted loss per share of $0.15 was right in line with estimates, revenue of $41.4 million pleasantly surprised Wall Street. On an annual basis, farm management revenue was nearly $10 million in fiscal 2023, after generating zero revenue in the previous year.
Additionally, the company offered an update on its strategic review. CEO and President Harold Edwards said that Limoneira has already made progress on eliminating nonstrategic assets, and management has identified two more such assets that it expects to sell in fiscal 2024 for an anticipated $50 million in proceeds.
Analysts are bullish on Limoneira, with a unanimous “Strong Buy” rating from all five analysts in coverage. This optimistic outlook is underlined by the mean target price of $23.75, indicating a substantial 30.5% upside potential from the current price.
2. Mission Produce Stock
Mission Produce Inc. (AVO) is a global leader in avocado production and distribution, valued at $744 million by market cap. With growing and distribution operations spanning across multiple continents, the vertically integrated agriculture company has more recently added mangoes and blueberries to its portfolio, as well.
AVO is down about 13% over the past 52 weeks, which means the stock can now be scooped up around $10 per share.
In its own late-December earnings report, Mission Produce edged past Q4 EPS expectations at $0.11, but the 8.4% year-over-year revenue increase to $257.9 million fell short of estimates. Wall Street was looking for more robust sales of $288.5 million.
Mission Produce expects some softness in the avocado market during Q1, with lighter volumes and lower pricing stemming from smaller yields in Mexico. However, the company's blueberry segment is doing some heavy lifting; during Q4, net sales for blueberries were up 88% to $9.1 million as supply constraints drove higher pricing, and volume rose 29% YoY.
Analysts are optimistic about Mission Produce stock's prospects, with a unanimous “Strong Buy” rating from the four analysts in coverage. This confidence is further reflected in the mean target price of $14.38, indicating a significant 36.4% upside potential from its current price.
The Bottom Line on These “Strong Buy”-Rated Ag Stocks
For investors scouting the agriculture landscape, Limoneira (LMNR) and Mission Produce (AVO) are two stocks under $20 worth considering. With LMNR shedding nonstrategic assets and eyeing a potential sale, and AVO diversifying its portfolio to weather seasonal and regional crop disruptions, these agriculture picks could potentially add some green to investors' portfolios in the year ahead.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
