Mission Produce Inc. (AVO Quick QuoteAVO - Free Report) has faced notable weakness in the past month, with its shares declining as much as 20.5%. Despite a strong first-quarter fiscal 2025, the AVO stock’s downturn was largely led by market concerns over potential supply-chain disruptions in Mexico, which could be exacerbated by the ongoing tariff uncertainties.

Looking ahead, the company anticipates the impact of tariffs on Mexican supply dynamics to remain unpredictable. Additionally, its second-quarter fiscal 2025 outlook suggests that Mexico’s avocado volumes may decline as the harvest comes in lighter than initially expected.

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The company’s share slump has led it to underperform the Zacks Agriculture – Operations industry, the Consumer Staples sector and the S&P 500 index, which have declined 1.6%, 1.8% and 2.9%, respectively, in the past month.

AVO’s performance is also notably weaker than its close competitors, Archer Daniels Midland (ADM Quick QuoteADM - Free Report) , Limoneira Co (LMNR Quick QuoteLMNR - Free Report) and Dole (DOLE Quick QuoteDOLE - Free Report) , which posted declines of 0.2%, 19.6% and 3.8%, respectively, in the same period.

Mission Produce’s One-Month Price Performance

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Currently at $9.82, the AVO stock’s price reflects a 2.9% premium to the company’s 52-week low of $9.54. The PepsiCo stock is trading at a 35.6% discount from its 52-week high of $15.25, reflecting upside potential. The stock trades below its 50-day and 200-day moving averages, indicating a bearish sentiment.

AVO Stock Trades Below 50 & 200-Day Moving Averages

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Let us explore the reasons behind the company’s disappointing movement on the bourses and assess if there is potential for growth.

Decoding Investors’ Concerns for Mission Produce Stock

Investor concerns over volume projections have weighed on the stock’s performance, reflecting apprehension about potential sourcing challenges. While overall industry avocado volumes are expected to remain in line with the prior year, a projected decline in Mexico’s supply could pose hurdles. Given the critical role of Mexican avocados in meeting customer demand, any shortfall may impact the company’s ability to sustain its revenue growth trajectory.

AVO anticipates increased volumes from California and Peru to help offset the decline, but the transition may not be seamless, leading to supply inconsistencies. Ensuring a smooth shift in sourcing will be key to maintaining stable operations.

In the Peruvian blueberry segment, volume projections present both opportunities and risks. On the positive side, the harvest timing is expected to align with last year’s cycle, with approximately 20% of the crop being sold in the fiscal second quarter. This, combined with an anticipated 35-40% increase in total harvest volume, suggests strong production growth. The expansion in acreage and improved yields indicate operational efficiency, which could support revenue generation.

However, pricing pressures are challenging. A 33% year-over-year decline in average per-unit selling prices due to supply normalization raises concerns that higher volumes may not fully translate into increased sales. If this trend continues, profitability could be impacted, making cost efficiencies and strategic pricing crucial in mitigating margin pressures.

External factors such as weather conditions and global trade dynamics add uncertainty. Any unforeseen disruptions could affect the company’s ability to capitalize on expected volume growth. Investors will watch closely to see how effectively Mission Produce navigates these potential challenges in the coming quarters.

AVO’s Estimate Revision Trend

The Zacks Consensus Estimate for Mission Produce’s fiscal 2025 and 2026 EPS moved up in the last 30 days, indicating positive sentiment among analysts for the company's earnings. Although the company’s outlook looks decent, analysts seem confident about AVO’s prospects. The Zacks Consensus Estimate for fiscal 2025 and 2026 EPS have moved up 19% and 9.3%, respectively, in the past 30 days.

For fiscal 2025, the Zacks Consensus Estimate for AVO’s sales and EPS implies 6.6% and 32.4% year-over-year declines, respectively. The consensus mark for fiscal 2026 sales and earnings indicates year-over-year decreases of 3.2% and 6%, respectively.

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What’s Impressive About Mission Produce?

AVO's strengths are rooted in its robust global sourcing network and seamless operational alignment. By aligning sales with sourcing, the company effectively meets customer demand while optimizing per-unit margins. This integrated strategy enables Mission Produce to leverage favorable pricing dynamics, driving profitability and consistent performance in its Marketing and Distribution segment.

The company’s efficiency across its global network underscores its competitive edge in managing supply chains and seizing market opportunities. AVO’s focus on operational excellence, growth initiatives and prudent capital allocation highlights its long-term growth potential.

Mission Produce’s avocado segment demonstrates strong fundamentals, supporting a favorable long-term outlook. In first-quarter fiscal 2025, the 29% increase in total sales, largely driven by a 25% rise in per-unit selling prices alongside a 5% increase in volume, highlights sustained demand. Additionally, expectations of a 5% year-over-year price increase in the fiscal second quarter suggest continued market strength.

From a strategic standpoint, expanding sourcing capabilities, including increased harvesting activity from California and Peru, provides greater supply stability. The company’s ongoing investment in Latin America, including the development of its Guatemalan operations, enhances its long-term competitive positioning and resilience against regional supply constraints.

Consumer trends also favor long-term growth, with global demand for avocados continuing to rise due to their health benefits and increasing popularity in emerging markets. The company's ability to leverage its international farming segment and optimize distribution channels will be critical in capitalizing on these tailwinds.

While short-term challenges like supply fluctuations in Mexico exist, the company’s proactive approach to diversification and efficiency improvements positions it well for sustained profitability and growth in the avocado segment.

Is AVO’s Premium Valuation Justified?

Mission Produce is currently trading at a forward 12-month P/E multiple of 24.07X, exceeding the industry average of 14.11X and the S&P 500’s average of 21.18X.

Although the current valuation may seem expensive, the stock trades much below its five-year high of 58.58X, indicating upside potential. Despite the recent dip in the stock price, a premium valuation suggests that investors have high expectations for AVO's future performance and growth potential.

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Is the Mission Produce Stock Dip a Buy Opportunity?

While AVO’s premium valuation and recent stock performance may appear concerning at first glance, we cannot ignore the company’s competitive edge in its global sourcing network and integrated operations. Its strong market position, rising avocado prices and effective operational execution bode well.

For investors, Mission Produce offers exposure to a growing market and the ability to deliver improved financial efficiency to drive long-term returns. Despite the pricey valuation, the Zacks Rank #2 (Buy) company’s prospects and recent dip offer an attractive entry point for investors. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.