Mission Produce (AVO): Understanding The Long-Term Upside Ahead of Q3 Results

Mission Produce (AVO) generates around 85% of its revenue from avocados, but a price drop is impacting sales. Mexico's oversupply, not weak demand, is behind the pricing issues, but prices are now anticipated to rebound. The company's ability to absorb price shocks is better than indicated by recent headlines, with fiscal Q1 gross margin increasing by 190 basis points despite a 30% drop in prices.

Seasonal factors favor Mission in the second half of the year, with a record Peruvian harvest and management providing optimistic guidance. Insiders and institutions are investing in the company, including its directors, largest shareholder, and elite funds run by billionaires. The stock trades at 11.9 times forward EV/EBITDA, suggesting a value of $16.50 per share, which is about 29% above the current level.