PG&E Extends Rally as Street Awaits California Fire Fix Details
(Bloomberg) -- PG&E Corp. shares rose as much as 7.9 percent Monday as the Street weighed California Governor Gavin Newsom’s Friday report on ways to cover the costs of the state’s wildfires. Some analysts applauded the progress, though the lack of firm details gave others cause for caution.
Today’s move extends a 21 percent rally on Friday, setting the stock on course for its highest close this year.
Some analysts were confident there would now be progress. Citi’s Praful Mehta in a note asserted that California “will get something constructive accomplished by July.” He reiterated buy ratings on both PG&E and Edison.
Height Securities policy analyst Katie Bays looked for a more concrete plan. “The report pays lip service to the importance of maintaining investable utilities, but we’re unconvinced that Newsom himself is willing to demonstrate leadership toward that purpose,” she wrote.
Newsom presented a variety of options for addressing future wildfire costs but without indicating a preference for any he’s leaving the “hard questions to the legislature,” Bays said. She also cautioned the July target was more likely meant to pressure legislators “rather than to set an achievable deadline.”
Investors might not be out of the woods yet, RBC analyst Shelby Tucker warned, adding PG&E to his list of least favored names. He also removed Edison International -- anther utility company stock that had shared in the rally -- from his “best plays.”
“Expect more negative headlines to dominate over the next several months, which could wipe out some of the stock gains” for the two power companies, Tucker said.
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