Shares of leading avocado producer Mission Produce (AVO) witnessed a decline of over 12% in the past few days despite reporting strong Q1 2025 revenue growth of 29%, outperforming Wall Street’s expectations. Higher avocado prices and increased sales volume in the Marketing & Distribution segment fueled this growth. Although the company tackled supply challenges in Mexico, the ongoing trade war could exacerbate these issues. Despite delivering an earnings beat and seeing a 5% increase in avocado volume sold, the company experienced a decreased adjusted EBITDA due to margin pressure and higher fruit costs tied to the difficulties in securing Mexican supply. Fears of the negative impact of tariffs have dampened investor sentiment.
Tariffs Clouding the Picture
Mission Produce is a global leader in producing and distributing avocados, blueberries, and mangos, catering to customers in over 25 countries worldwide. Its vertical integration structure is supported by four packing facilities in major cultivation areas such as California, Mexico, and Peru while sourcing from other countries to ensure a consistent year-round supply.
The company plays a significant role in the U.S. market, where avocado consumption has tripled between 2000 and 2021. A substantial 90% of avocados consumed in the U.S. are imported from Mexico. President Trump’s introduction of a 25% tariff on Mexican imports has injected uncertainty into the potential market impact.
In Q1, the company reported higher-than-expected earnings despite pressures from increased fruit costs. Revenue exceeded predictions, coming in at $334.2 million, a year-over-year increase of 29% and notably above the anticipated $272 million. The company also posted adjusted earnings of $0.10 per share, compared to market expectations of $0.03. However, the company experienced an 8% drop in adjusted EBITDA to $17.7 million despite this. This performance was primarily impacted by decreased gross margins on avocados sold due to a troubled Mexican supply and customer commitment demands.
Mission Produce also indicated that the total avocado volume sold expanded 5% year-over-year, and the average selling price rose by 25%. This trend reflects the ongoing supply constraints in Mexico and a steady consumer demand. For the next quarter, the company forecasts the industry’s avocado volumes to be consistent with the same period in the prior year, with pricing expected to be around 5% higher.
Is Mission Produce a Buy?
Mission Produce is rated a Moderate Buy overall, based on the recent recommendations of two analysts. The average price target for AVO is $17.00, which represents a potential upside of 63.78% from current levels.
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