Wall Street Reacts To The Latest PG&E Liability Ruling

PG&E Corporation PCG investors recieved some much-needed good news Thursday that sent the stock skyrocketing nearly 75 percent.

PG&E was cleared of liability for the 2017 California wildfires, and several Wall Street analysts have already weighed in on what the latest news means for investors. Here’s a sampling of what they had to say.

Positive Development

Guggenheim analyst Shahriar Pourreza said the California ruling underscores the idea that a bankruptcy filing is premature at this point.

“We maintain our view that absent major incremental wildfire charges in excess of ~$2B pretax, PCG should remain solvent despite the reiterated intent to file bankruptcy on January 29,” Pourreza wrote in a note.

JPMorgan analyst Christopher Turnure said the Tubbs wildfire report is obviously a positive development for PG&E, but the outlook for the stock is still too uncertain to be buying at current levels.

“The primary challenges are that potential liabilities continue to exceed the financing capacity of the company and PCG will face years of litigation stemming from the 2017-18 wildfires absent its potential bankruptcy filing,” Turnure wrote.

Bankruptcy Inevitable

“They dodged a huge bullet, but the company likely still is headed to bankruptcy,” said Kit Konolige, utility analyst for Bloomberg Intelligence. “I think they will decide that it’s basically too little, too late.”

Morgan Stanley analyst Stephen Byrd said the new ruling likely won't be enough to prevent PG&E from following through on its plans to file for bankruptcy.

“We think a key factor in the decision to file was to resolve the risk of future open-ended fire liabilities, which we think could severely restrict access to capital for the company without a fundamental change in the legislative or regulatory treatment of fire damage,” Byrd wrote.

RBC Capital Markets analyst Shelby Tucker said the ruling was encouraging, but the company will likely continue on its bankruptcy path as it seeks to take a stand against inverse condemnation of public California utilities.

“While the CAL FIRE announcement could fuel further pressure on the Board to reconsider its intent to file for bankruptcy, we don’t believe it changes PG&E’s posture as it relates to a potential filing,” Tucker wrote.

Ratings And Price Targets

• Guggenheim has a Neutral rating.
• JPMorgan has a Neutral rating and $11 target.
• Morgan Stanley has an Equal-Weight rating and $17.50 target.
• RBC has a Sector Perform rating and $16 target.

Shares traded down 14.4 percent at $11.93 Friday morning.

Related Links:

PG&E Investors Breathe Sigh Of Relief

How PG&E's 2001 Bankruptcy Compares To Its Current Situation

Photo credit: Frank Deanrdo, Flickr