On Tuesday, CoreCivic (NYSE:CXW) shares, currently trading at $21.93 with a market capitalization of $2.37 billion, received an upgrade from Neutral to Outperform by an analyst at Wedbush, alongside a significant increase in the price target to $30.00, up from the previous $19.00.
According to InvestingPro analysis, the stock appears slightly overvalued at current levels. The revision follows a reassessment of the company's prospects in light of recent statements from the Trump administration's transition team.
The upgrade was prompted by the potential for an increased need for ICE detention beds, which could lead to the reactivation of CoreCivic's South Texas contract, previously lost earlier this year. This contract had been a substantial contributor to CoreCivic's EBITDA, which currently stands at $332 million.
InvestingPro data shows the company maintains strong financial health with a current ratio of 1.51, indicating solid liquidity. The potential contract return is seen as a positive driver for the company's financial performance.
The analyst also noted the possibility of an increase in EBITDA that could accelerate share repurchase activity, which had been paused after the South Texas contract was terminated. The anticipation of this growth has led to a reassessment of the stock's valuation and the raised price target.
CoreCivic's stock has already experienced a notable rise, having increased 61% since election day, a performance significantly outpacing the S&P 500's 5% gain over the same period. The analyst's outlook suggests that the expected acceleration of EBITDA growth could justify a higher stock multiple.
The revised outlook for CoreCivic by Wedbush reflects a more optimistic view of the company's future earnings potential, as political developments may favorably impact its business operations. The analyst's comments underscore the importance of the South Texas contract to CoreCivic's financial health and the company's ability to resume share repurchases.
In other recent news, CoreCivic has demonstrated a strong financial performance in the third quarter of 2024. The company reported a 2% revenue increase to $491.6 million, attributed to state revenue growth and improved occupancy rates.
CoreCivic's normalized funds from operations (FFO) per share also saw a 23% rise to $0.43, despite increased general and administrative costs. These developments are part of recent events that have unfolded within the company.
Jones Trading has upgraded CoreCivic's stock rating from Hold to Buy, reflecting the anticipated growth opportunities for the company in the coming years. This decision was made in response to the recent political shift and the expectation of increased appropriations for CoreCivic's largest customers, including Immigration and Customs Enforcement (ICE) and the US Marshals Service.
The company has updated its 2024 financial guidance, expecting an adjusted EPS between $0.69 and $0.75 and normalized FFO per share between $1.59 and $1.65. CoreCivic has also repurchased 4 million shares and maintains a total liquidity of $365 million, with no debt maturities until 2027. These recent developments provide a snapshot of CoreCivic's current financial health and future expectations as per the analysts' analysis.
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