Alright you beautiful degenerates, time to stop staring at charts for five minutes and listen up.
One of our three letter agencies needs beds. Not the ones you’re laying in as you read this post while debating what to full port today. They need facilities with bed capacity, and lots of it. At the moment, there are two publicly traded companies that have what they’re looking for.
Before we get into that, let’s run through the DD (grab your crayons and a piece of paper). Few months back, the agencies flirted with the idea of buying random warehouses and converting them into detention centers.
They quickly learned that these warehouses don’t come with plumbing, kitchens, cell blocks, or staff that know how to run the place. A few billion dollars and a few months later, after lawsuits, protests, a government shutdown, and the small Middle East problem, they recently decided to scrap the plan.
Back when news first broke about this warehouse plan, the same articles also frequently mentioned a plan to buy “turnkey facilities”. The kinds of facilities already fully built, staffed, and ready to operate at the turn of a key (you get it now?). And these same articles kept mentioning the two companies that have exactly that (and apparently were already in talks with the gov to sell them these facilities).
Corecivic (CXW) and Geo Group (GEO) have 20,000+ idle beds right now across many facilities. The government wants 10 facilities and we know they love to overpay for stuff. They also just recently passed the $70 billion reconciliation bill to fund certain agencies. Last I checked, the market caps of these prison companies are $3-4 billion. Do you smell what I smell? MONEY.
So here’s where it gets good. Ever since the bill passed in early June, these stocks have run 30-45%. And this is before any sort of actual news regarding the sale of these facilities.
A few days ago, Benchmark (an equity research firm) analyst Bill Sutherland held a call with CXW’s CEO and CFO. The result? He slapped an 80% probability on the sale of two facilities and upped his price target to $36 from $28 (and that’s using conservative pricing assumptions. That being said, we know there’s nothing conservative about how lackadaisical our leaders spend money.
https://www.investing.com/news/analyst-ratings/benchmark-raises-corecivic-stock-price-target-on-detention-demand-93CH-4762738
The same day (June 26), Northland (another equity research firm) increased their CXW price target from $32 to $40, and their GEO price target from $30 to $40.
CXW closed around $30.5 today and GEO around $29.5. If ol’ Bill at Northland is right (I’ve followed Bill for years and he gave me a 3000%er from June 2024 - May 2025), then we’ll be seeing $40 before you know it.
Last but not least, call volume on both stocks has been absolutely insane for weeks now. I’m talking 30:1 and 100:1 call:put volume, and tens of millions in calls expiring in the next couple months.
I’d imagine by now, all of the above should have the Robinhood crowd drawn in. Now as for you finance bros and quants, the boring part: both companies actually make money!
CXW’s last quarter earnings came in at $0.40 EPS vs $0.28 expected, and then they raised guidance for the year. GEO’s last quarter earnings were so good, the stock ripped 20% that day. EPS doubled year over year and came in at $0.29 vs $0.19 expected, and they also bumped their 2026 revenue guide.
Now here’s the even more boring part where I tell you about the risks. The government shutdown I mentioned earlier? That dropped the stocks over 20% back in January/February. A single policy headline can do the same thing. And on top of that, timing is genuinely anyone’s guess, which is a problem if you’re wanting to full port the shortest dated furthest OTM calls like me.
The play: shares if you enjoy sleeping and are happy with 50% returns. Aug/Sep calls slightly OTM if you’re a risk taker but also want sizable returns. The catalyst is a headline confirming the first sale.
TLDR: Government needs beds. Two companies have many beds. Analysts put 80% odds on the first sales and increased PTs over 30% higher than current prices.
NFA. I failed PE class in middle school and my broker has me on a watchlist.
