CoreCivic's Dip Could Present A Buying Opportunity

After a huge post-election rally, Corecivic Inc CXW shares are down 3.6 percent in the past month as uncertainty about a possible impeachment of President Donald Trump have continued to rise.

However, after meeting with company management, Canaccord Genuity analyst Micheal Kodesch is convinced the recent pullback is a buying opportunity.

Correctional Facility REIT Space And Trump

“With the prison REIT stocks facing material pressure this week as a result of further unwinding of the Trump trade, we believe the space has once again become a compelling investment, especially as much of the underlying investment profile hasn’t changed,” Kodesch said.

Related Link: Breaking Down Trump's 'Skinny Budget'

The company is realistic about its risks in the California market, but additional contract losses are unlikely, he said.

At the same time, management is optimistic it will lock in a new leasing contract within the next 60 days. Although the company couldn’t disclose which property is involved, Canaccord speculates it is likely the 2,160-bed Diamondback facility in Oklahoma. The 2,400-bed North Fork Oklahoma facility generates roughly $10 million in revenue per year, Kodesch added.

In addition, Canaccord expects CoreCivic to complete a deal for all 2,500 idle beds in Kentucky before the end of the year.

Buying The Dip

A refresh of aging facilities could also be a major tailwind for CoreCivic, Kodesch said. There are currently over 300,000 prison beds in the U.S. in facilities that are more than 100 years old.

Following the pullback, CoreCivic shares are trading at a discount to REIT peers at a P/FFO of just 14.9.

Canaccord maintains a Buy rating and $36 price target for CoreCivic.

At time of publication, shares of CoreCivic were up 3.19 percent at $31.70.