Mission Produce's Revenue Growth Masks Persistent Risks Amid Calavo Integration

What happened

Mission Produce reported a 10% revenue rebound, driven by stronger avocado volumes and expansion into blueberries and mangoes, as highlighted in a recent Zacks article. However, DeepValue analysis reveals this growth occurs amid high capital expenditure for vertical integration and persistent tariff risks from U.S.-Mexico trade dynamics. The company's heavy customer concentration, with top 10 accounts representing 67% of sales, amplifies revenue volatility and bargaining power concerns. Additionally, the pending Calavo acquisition introduces regulatory and execution uncertainties that could undermine projected $25 million synergies and margin improvements. Insider buying by Globalharvest Holdings suggests confidence, but it does not mitigate the structural challenges facing Mission's business model.

Implication

The revenue rebound demonstrates Mission's operational agility but fails to alleviate concerns over its premium valuation and exposure to avocado price swings. Tariff-related costs and potential regulatory delays for the Calavo deal threaten to erode anticipated synergies and EBITDA margins. High capex in international farming continues to constrain free cash flow, limiting financial flexibility for debt reduction or shareholder returns. While insider accumulation may indicate near-term optimism, it does not compensate for the crowded market narrative and elevated multiples. Therefore, maintaining a 'WAIT' stance is advisable until clearer evidence of durable profit growth and successful merger execution emerges.

Thesis delta

The 10% revenue growth reinforces Mission's volume momentum but does not shift the investment thesis, which remains anchored to Calavo acquisition outcomes and margin sustainability. Key risks, including customer concentration and tariff volatility, persist unchanged, keeping the recommendation at 'WAIT' for a more attractive entry point or tangible progress on synergy delivery.