The month of May saw small-cap lemon producer Limoneira (NASDAQ:LMNR) wipe away the gains it had made year-to-date. The company issued an interim update to its full-year guidance on May 13 and shares plummeted roughly 15% shortly thereafter. The declines have continued, and presently, LMNR stock is trading for $19.34—the lowest level thus far in 2019.
Is LMNR Stock Undervalued?
The company’s update to the full-year guidance shook investors. Due to multiple crop variables, Limoneira reduced its full-year operating income target to between $14.75–$17.5 million. It had previously been set at between $20–$23 million. Further, adjusted EBITDA is expected to come in between $23.5–$27.5 million from a prior expectation of $28–$32 million.
Understandably investors were disappointed with the reduced targets, but the reason for this is out of the company’s hands; mother nature.
LMNR Stock: Weather Hampers Crops
Weather conditions have stifled operations. Excessive rains in California have created “an overabundance of large, fresh lemons,” and this has put pressure on lemon pricing. Alongside this, the rains have pushed the domestic lemon harvest into Limoneira’s fiscal third quarter, which ends on July 31.
Though good weather for lemon growth, the poor weather conditions have hampered orange growth, and this has compressed orange market pricing. Akin to that, the company will reflect minimal avocado harvest revenue in 2019 due to excessive heat in the summer of 2018.
With the crop yields suffering in their respective ways, LMNR stock has fallen drastically. But does this offer an opportunity for investors?
Is LMNR Stock an Undervalued Play?
Well, the company is still to show its lemon volume and crate pricing in its fiscal Q3 report. Issued in the fall, this could sway shares once again.
But according to the Motley Fool, if you are prepared to hold these shares, then buying now while prices are on the lower side is a good idea:
“Patient investors with a three- to five-year holding period may see no reason to delay picking up shares now while they’re priced more cheaply than both a related agribusiness and the company’s extended small-cap peer group.”
Are you an agricultural investor? What are your thoughts on LMNR stock?
Featured Image: DepositPhotos © logoboom