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On Thursday, Barclays (LON:BARC) analyst Nicholas Campanella revised the price target for Edison International (NYSE:EIX) shares, reducing it to $67.00 from the previous $76.00, while maintaining an Overweight rating on the company's stock. With the stock currently trading at $58.29, this target implies significant upside potential. The adjustment comes ahead of the company's fourth-quarter 2024 preview and investment update, which is anticipated later in February.
Edison International's stock has experienced a notable downturn at the start of the year, attributed to the devastating Los Angeles Wildfires, with a steep YTD decline of 26.21%. Currently, the company's shares are trading at a 40% price-to-earnings (P/E) discount compared to its large-cap electric utility peers, with a P/E ratio of 17.26x. Despite this, Barclays continues to view the valuation as excessively punitive, considering the potential liabilities that Edison International may face in the coming years. According to InvestingPro analysis, the stock's RSI suggests it's in oversold territory, potentially presenting an opportunity for value investors.
Barclays expects a broad reaffirmation of Edison International's financial plan during the upcoming call, including the fiscal year 2025 earnings per share (EPS) guidance and a long-term EPS growth target of 5-7%. The firm's analysis suggests that the AB 1054 wildfire fund should cap the company's losses at approximately $4 billion, even in cases where Edison International's practices are deemed non-prudent. Notably, InvestingPro data shows the company has maintained dividend payments for 22 consecutive years, currently offering an attractive 5.68% yield.
In scenarios where utility lines are implicated in the wildfires, Barclays estimates that liabilities could climb to $10.5 billion. However, due to the provisions of the current AB 1054 legislation, Edison International's exposure would likely remain around $4 billion. This assessment underpins Barclays' decision to uphold the Overweight rating despite the reduction in the price target.
Investors are now looking towards the end of February when Edison International is expected to provide more clarity on its financial outlook and address how it plans to manage the implications of the recent wildfires on its operations and finances. The stock is currently trading near its 52-week low of $55.27, with InvestingPro identifying 8 additional key factors that could influence the stock's future performance. Access the comprehensive Pro Research Report for detailed analysis of Edison International's financial health and growth prospects.
In other recent news, a brush fire, known as the Hughes Fire, rapidly spread in the Castaic region of northern Los Angeles County, covering over 3,400 acres. Global data analytics firm Verisk (NASDAQ:VRSK) has projected insured property losses from the Palisades and Eaton (NYSE:ETN) fires to be between $28 billion and $35 billion. These fires are considered the most destructive in Los Angeles' history, likely making this the most expensive disaster ever in California for insurers.
Edison International's stock rating was upgraded from Sell to Neutral by analysts at Ladenburg Thalmann, reflecting the potential worst-case scenarios related to the ongoing California wildfires. However, the company faces scrutiny over its potential involvement in the fires, with investigations into the origins of the fires placing Edison International's Southern California Edison at the center.
Citi maintains a Buy rating on Edison International despite the wildfires. Meanwhile, Barclays upgraded Edison International's stock from Equalweight to Overweight, citing advancements in handling wildfire-related issues and regulatory proceedings. These recent developments highlight the evolving situation for Edison International amidst the ongoing wildfires in Los Angeles.
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