PG&E Stock Recovers Pre-Market On BMO Upgrade As Wildfire Concerns Drive Retail Sentiment To Year-Low
Analysts remain bullish on PG&E’s growth outlook even as the stock faces pressure from heightened wildfire fears and bearish retail sentiment.
PG&E Corp. (PCG) stock rose more than 1% in pre-market trading Monday after BMO Capital initiated coverage with an ‘Outperform’ rating and a $21 price target.
The brokerage described PG&E as a strong investment within the regulated utility sector, citing a combination of high growth potential and compelling valuation, according to TheFly.
BMO projects the company will achieve 9.2% annual earnings growth and 10% rate base expansion over the next five years, aligning with PG&E’s long-term targets.
The upgrade comes after a challenging week for the California-based utility.
On Friday, PG&E shares dropped over 10% in mid-day trading, hitting their lowest levels since July.
The stock has shed more than 14% in value over the past five days, leaving it down over 5% year-to-date.
Concerns over potential wildfire liabilities have driven the sell-off. Wildfires in Los Angeles County, fueled by strong winds and dry conditions since Tuesday, have heightened investor fears about California utilities’ exposure to legal and financial risks.
While the wildfires are outside PG&E’s service territory, the utility has a history of significant wildfire-related liabilities, including over $30 billion in claims from previous incidents that led to its Chapter 11 bankruptcy in 2019.
PG&E Corp. Sentiment and Message Volume on Jan.13 as of 6:45 a.m. ET | Source: StocktwitsRetail sentiment, however, tells a different story. On Stocktwits, sentiment toward PG&E turned ‘extremely bearish,’ its lowest level in a year, even as chatter remained at normal levels.
One user wrote that the stock will only recover once the fires are put out.
Another argued the wildfires’ financial impact on utilities will likely be limited but could cause significant local damage, potentially exceeding the devastation of the 2018 fires that implicated PG&E.
Other analysts have echoed BMO’s optimism. Wells Fargo noted last week that the broader sell-off in California utilities, which has also impacted Edison International (EIX), Sempra Energy (SRE), and California Water Service (CWT), appears overdone.
While acknowledging heightened wildfire risks, Wells Fargo argued the market reaction may not fully reflect the state’s $21-billion utility fire insurance fund, designed to mitigate catastrophic liabilities for investor-owned utilities.
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Read also: PG&E Stock Sinks To 6-Month Low As LA Wildfires Likely Among California’s Costliest, But Retail Shows No Panic