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On Monday, Evercore ISI analyst Durgesh Chopra adjusted the price target for Xcel Energy (NASDAQ:XEL) shares, raising it to $77 from the previous $74 while maintaining an Outperform rating. The revision reflects Chopra’s assessment of the potential risks and rewards associated with Xcel Energy’s stock, factoring in possible wildfire liabilities. The utility giant, with a market capitalization of $39.8 billion, has demonstrated remarkable stability with 54 consecutive years of dividend payments, according to InvestingPro data.
Chopra’s analysis includes a scenario-based approach to valuing the company’s shares. The $77 base case price target is derived from a weighted average of three potential outcomes: a 70% probability of a $215 million wildfire loss, a 20% chance of a $1.5 billion loss, and a 10% likelihood of a $2.5 billion loss. These scenarios take into account recent wildfire damages as a benchmark for potential future liabilities. The target aligns with broader analyst sentiment, as InvestingPro data shows analyst targets ranging from $62.10 to $83.00, with five analysts recently revising their earnings estimates upward.
The bull case scenario set forth by Evercore ISI suggests a valuation of $80 per share, assuming Xcel Energy experiences a wildfire loss at the lower end of the company’s estimated range, $215 million, and the stock trades at a 5% premium to the target multiple. Conversely, the bear case valuation is set at $66 per share, where a $2.5 billion wildfire loss is modeled along with a stock multiple approximately 10% below the target.
The adjustment in the price target is also accompanied by a change in the target multiple used for valuation, which has been increased from 16 times to 17 times. This change underpins the raised price target and reflects a more optimistic view of the stock’s value in light of potential risks.
The comprehensive scenario analysis by Evercore ISI takes into consideration a range of wildfire losses from $1.5 billion to $2.5 billion, adjusted for insurance coverage, which would net between $1.0 billion and $2.0 billion in potential losses for Xcel Energy. This framework is used to evaluate the company’s financial exposure and the subsequent impact on its stock valuation. For deeper insights into Xcel Energy’s financial health, risk metrics, and comprehensive valuation analysis, investors can access the detailed Pro Research Report available on InvestingPro, which covers over 1,400 US stocks with expert analysis and actionable intelligence.
In other recent news, Xcel Energy reported its first-quarter 2025 earnings, which fell short of market expectations. The company announced earnings per share (EPS) of $0.84, missing the forecasted $0.93, and revenue of $3.91 billion, slightly below the anticipated $3.93 billion. Despite the earnings miss, Xcel Energy reaffirmed its full-year 2025 earnings guidance of $3.75 to $3.85 per share, highlighting its ongoing investment plans in renewable energy and infrastructure. Mizuho (NYSE:MFG) Securities maintained an Outperform rating on Xcel Energy and raised the price target from $70 to $74, reflecting confidence in the company’s future performance despite the challenges faced in the first quarter.
The earnings shortfall was attributed to timing issues related to the recovery of fuel and purchase power costs, which are expected to be recouped later in the year. Mizuho analysts project that Xcel Energy will achieve results in the upper half of its 6-8% earnings per share compound annual growth rate (EPS CAGR) forecast. The company is also actively engaging in wildfire mitigation efforts and has reached settlements related to the Smokehouse Creek Fire, with an updated liability estimate of $290 million, remaining well below its insurance coverage of $500 million.
Xcel Energy continues to focus on growth through investments in renewable energy, aiming to meet increasing demands for clean energy solutions. The company is involved in significant infrastructure projects and has reaffirmed its commitment to serving its customers while keeping bills as low as possible. Additionally, Xcel Energy is optimistic about its ongoing projects, which are expected to drive growth in the coming quarters.
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