My CoreCivic (NYSE:CXW) article must start with a confession: I was expecting to write a completely different article. Based on political winds prior to the State of the Union (SOTU) address, CXW stock seemed bullish. The idea was that President Joe Biden was weak; contender Donald Trump was strong. Therefore, Trump would win, and CoreCivic (a private prison and detention center operator) would soar on the law-and-order message. However, the Republican response took an unexpected turn. I’m now neutral on CXW.
CXW Stock Is a Tale of Certainty to Uncertainty
As TipRanks contributor Yulia Vaiman mentioned, former South Carolina Governor Nikki Haley bowed out of the race for the GOP nomination. Therefore, the electorate will be treated to a rematch that arguably few people are excited about. After all, the combined age of the two leading candidates comes out to 158 years.
Still, the pulse of the political ecosystem – prior to the SOTU address – seemed to favor the former president. Like him or not, the harsh reality is that President Biden’s disapproval rating is alarmingly high. That’s been a vexing challenge for the Democrats. Despite numerous encouraging data, such as disinflationary trends and a robust labor market, the American people are not feeling better off under liberal leadership.
If they were better off, presumably, credit card balances wouldn’t skyrocket to over $1 trillion. Also, credit card companies probably wouldn’t see rising delinquency rates. Former President Trump and the Republicans appear to have a lot of ammunition. One weakness they have long sought to exploit is the law-and-order record. Naturally, that’s where CXW stock comes in.
As a private prison and detention center operator, CoreCivic offers natural relevance. Without getting bogged down by the details, Biden and Trump offer disparate views about certain social issues, particularly immigration. With Trump’s hardline approach to criminality, CXW stock would seem to be a natural idea under his administration.
However, Trump winning is no longer a sure thing. Primarily, much of this pivot has to do with Biden. Prior to his SOTU address, his biggest detractors claimed that the president is too old for the job. Nevertheless, when it was showtime, Biden delivered an up-tempo speech, presenting a much more vigorous persona.
Early data may not be the most reliable. Still, a CNN poll indicates that Biden’s address helped shift perceptions about him in a positive direction.
Political Rumblings Make CoreCivic Difficult to Call
Another problematic issue for Republicans – and by logical deduction, CXW stock – was the GOP’s rebuttal. Typically, such assignments are thankless jobs, and they also tend to feature boilerplate talking points. That wasn’t the case when Alabama Senator Katie Britt took the spotlight.
Considered a rising star among Republicans, anticipation ran high for Britt to present a clear contrast to Biden’s vision for America. Britt accomplished that, but likely not in the manner she intended. Offering an unusual speech, the senator utilized various tones and emotions. However, many found the delivery distracting, which was widely panned. Predictably, it became fodder for Saturday Night Live.
For the Republicans, the main tactical goal was to dent Biden’s momentum that he had just accrued from his SOTU address. However, the only thing that people are talking about now in the political realm is Britt’s fumble. That was an untimely own goal that clouds the narrative for CXW stock.
To be sure, CoreCivic represents more than just a political play; it’s obviously a business. However, with the events of COVID-19 thrusting social equity issues to the forefront, investments like CXW stock basically need a Trump-sized catalyst.
Even in the best of circumstances, the idea of private prisons isn’t exactly popular. However, this concept is exponentially uglier in the current social environment. So, if it appears that Trump is unlikely to win, CXW stock will likely find it difficult to thrive.
Read Between the Lines
Interestingly, over the past 52 weeks, CXW stock gained over 58%. However, since the beginning of January, shares have only moved up about 2%. Last week, CXW gyrated to a 0.8% loss.
Looking at an options flow screener – which filters exclusively for big block transactions likely placed by institutions – no major trades materialized this month so far. However, one of the biggest recent trades was for the acquisition of Nov 15 ’24 17.00 Puts, with a premium paid of $202,300. This trade was placed on February 6.
Even without the SOTU drama and, at the time, rising momentum for Trump, many traders took a dim view of the private prison operator. And now that it appears that the political race is tighter than expected, CXW stock seems risky.
Is CXW Stock a Buy, According to Analysts?
Turning to Wall Street, CXW stock has a Strong Buy consensus rating based on three Buys, no Holds, and zero Sell ratings. The average CXW stock price target is $17.33, implying 18.1% upside potential.
The Takeaway: Republicans’ Missed Opportunity Clouds CXW Stock
CoreCivic is arguably a critical but socially controversial business. The best catalyst it has is a hardline Trump administration. However, the Republicans’ bungling in their response to President Biden’s SOTU address may mean that the political race is tighter than anticipated. That puts a big question mark over CXW stock.
