GEO Group REIT (GEO) Stock: Skyrocketing Following Recent Declines


GEO Group REIT is having an incredible day in the market today, and for good reason. The company announced a contract renewal this morning. This is much needed news after prison stocks plunged on Justice Department news. Today, we’ll talk about the news from the Justice Department, the news released today, what we’re seeing from the stock in the market, and what we can expect to see from GEO moving forward.

GEO Hit Hard By Justice Department News

Recently, the Justice Department released news that it would no longer be using private prisons. This hit GEO Group REIT incredibly hard as this is the core of their business. However, analysts have started to weigh in on the news, saying that the massive declines were far overdone. Here’s what Ryan Meliker, analyst at Canaccord Genuity had to say about the declines…

The massive falloffs in the stocks imply that the risk will spread to other federal, state and local jurisdictions. While this is possible, we believe it is unlikely. As such, we think today’s stock action is more based on fear than actual cash flow risk…”

A Key Contract Has Been Renewed

As mentioned above, GEO is bouncing back today after announcing that a key contract has been renewed. The contract is between the company and the Federal Bureau of Prisons (BOP). Originally, the 10 year contract surrounding the D. Ray James Correctional Facility was set to expire on September 30th, 2018. However, it was announced that the contract was renewed and will no be effective through September 30th, 2022.

This is a key piece of news that jives well with what Meliker and other analysts have had to say. While declines were warranted, the drastic declines are what we would expect to see if the trend spread into federal and other jurisdictions. However, in this particular case, the contract renewal announce today shows that this is clearly not a problem. In a recent statement, CEO George Zoley had the following to say…

We believe that this contract renewal is indicative of the BOP’s continued focus on quality as it evaluates its current privately-operated facilities.”

How The Stock Reacted To The News

As investors, one of the first things that we learn is that it’s important to watch the news. That’s because, any time news is released with regard to a publicly traded company, we can expect to see movement in the value of the stock associated with the news. In this case, the news that was released today with regard to GEO was much needed positivity. As a result, we’re seeing strong gains in the value of the stock today. Currently (4:02), the stock is trading at $23.68 per share after a gain of $4.17 per share or 21.37% thus far today.

What We Can Expect To See Moving Forward

Moving forward, I have an overwhelmingly bullish opinion of what we can expect to see from GEO. While the Department of Justice news was bad news for the company overall, I believe that the stock took a much larger dive than it should have. With other jurisdictions still likely to continue working with privately held companies, and GEO Group REIT being one of the best in the business, I’m expecting to see further gains ahead.

What Do You Think?

Where do you think GEO is headed and why? Join the discussion in the comments below!