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Analyst Bullish On PG&E Following Wildfire Mitigation Plan

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Analyst Bullish On PG&E Following Wildfire Mitigation Plan

After a massive bankruptcy sell-off and dramatic recovery in 2020, California utility PG&E Corporation (NYSE: PCG) is off to a lackluster start to 2021. However, one analyst says PG&E shares have more upside ahead once investor confidence returns.

The PG&E Analyst: Bank of America analyst Julien Dumoulin-Smith reiterated his Buy rating and $14 price target for PG&E.

The PG&E Thesis: Dumoulin-Smith said PG&E shares have continued to lag its utility peer group, but that dynamic could change once a handful of overhangs are removed. He said PG&E’s new Wildfire Mitigation Plan (WMP) is an important step in the right direction.

“We see the recently filed WMP as an opportunity to continue to focus on operational improvements given an enhanced risk model with machine learning capabilities (vs prior regression) to prioritize and execute on 80% of vegetation mgmt. and system hardening to be completed in the next three years in the top 20% riskiest zones,” Dumoulin-Smith wrote in a note.

Related Link: Analyst Assesses PG&E's Zogg Fire Liability Risk

Bank of America estimates PG&E will require $600 million in financing following its recent $973 million telecom tower license sales deal. Dumoulin-Smith said investors should also expect to get a strategy and restructuring update from the company’s new management team, including CEO Patti Pope.

Bank of America is projecting 2021 EPS of $1.02, suggesting the stock is trading at just 11.7 times forward earnings.

Benzinga’s Take: PG&E and its investors may have made it through the darkest days at this point, but there is still plenty of uncertainty surrounding the stock, its capital needs and its long-term strategy under new management. The earlier investors get in on the recovery, the more potential upside there will be. However, PG&E still has tremendous headline risk at this point.

A PG&E yard in San Francisco. Photo by Peter Merholz via Wikimedia.

Latest Ratings for PCG

DateFirmActionFromTo
Mar 2021Wells FargoUpgradesUnderweightEqual-Weight
Jan 2021Morgan StanleyMaintainsEqual-Weight
Jan 2021Wells FargoDowngradesEqual-WeightUnderweight

View More Analyst Ratings for PCG
View the Latest Analyst Ratings

 

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GDWolfe ResearchDowngrades
QRTEAB of A SecuritiesInitiates Coverage On
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