Jefferies cuts PG&E stock price target to $20, maintains buy rating

On Wednesday, Jefferies analyst Julian Dumoulin-Smith adjusted the price target for PG&E Corporation (NYSE:PCG) stock, reducing it to $20.00 from the previous $25.00, while continuing to recommend the stock as a Buy. The revision comes in the wake of the recent California wildfires, particularly the Eaton (NYSE:ETN) Fire, which has led to updated wildfire risk assumptions for both Edison International (NYSE:EIX) and PG&E Corporation.

Dumoulin-Smith’s analysis suggests that Edison International’s equipment may have played a role in causing the Eaton Fire. Despite this, the analyst’s base case does not assume negligence on the part of EIX and anticipates that the company will have access to the AB 1054 Wildfire Fund, which was established to help utilities cover costs related to wildfires.

The report acknowledges the ongoing debate among investors regarding the likelihood that EIX exhibited negligence or "conscious or willful disregard of the rights and safety of others". This debate has been fueled by evidence presented by the New York Times (NYSE:NYT) and plaintiff’s attorneys, which raises concerns about the potential involvement of a decommissioned transmission tower in the ignition of the Eaton Fire.

In light of these developments, Jefferies has also revised the price target for Edison International, lowering it to $69 from the earlier target of $93. Despite the more punitive scenarios factored into the analysis for both EIX and PCG, the firm sees long-term value in both companies, with a particular emphasis on the potential of PG&E Corporation.

The adjustments in price targets reflect the heightened scrutiny and financial risks that utility companies face in California, a state prone to wildfires, and the ongoing efforts to balance these risks with investment opportunities. InvestingPro subscribers have access to 10 additional key insights about PCG, including detailed analysis of its financial health, profitability metrics, and comprehensive Pro Research Reports that provide deep-dive analysis of the company’s performance and prospects.

In other recent news, PG&E Corporation has been the focus of several noteworthy developments. BMO Capital Markets initiated coverage on PG&E, assigning an Outperform rating and setting a price target of $21.00, based on a five-year forecast that anticipates a consolidated earnings per share growth of approximately 9.2% and a rate base growth of around 10%. This analysis underscores a potential for shareholders to realize substantial gains, underpinned by the company’s projected earnings and rate base growth in the coming years.

In a significant move, the Biden administration has pledged a record $15 billion loan to PG&E through the Energy Department’s Loan Programs Office. The loan is aimed at funding a range of projects designed to combat the effects of climate change, enhance the electrical grid, and enable the utility to meet its net-zero emissions goals. This financial support is expected to save PG&E customers close to $1 billion over the life of the financing, according to the utility.

In addition to these financial developments, PG&E has announced the appointment of Leo P. Denault to its board of directors, effective February 19, 2025. Denault, who has over four decades of experience in the power industry, will also serve on the Audit Committees of both boards and the Finance and Innovation Committee of the PG&E Corporation Board. These are among the recent developments that continue to shape the trajectory of PG&E Corporation.

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