Wells Fargo downgraded PG&E Corp. to Equal Weight from Overweight on Monday, citing persistent wildfire liability risks in California and a lack of meaningful legislative backstop.
The bank maintained its $24 price target on the utility’s shares, which were trading at $16.60 at the time of the report. PG&E’s stock has declined 8.3% over the past week, according to the analysis.
Wells Fargo analyst Shahriar Pourreza characterized California as a "value destructive jurisdiction" due to ongoing regulatory and legal challenges facing utilities. The downgrade reflects concerns over potential liabilities beyond 2030, when transmission and distribution liability caps are set to expire under current state proposals.
Analysts at BMO Capital and UBS offered contrasting views. BMO reduced its price target to $21 from a prior $24 and downgraded the stock to Market Perform from Outperform. UBS, however, reiterated its Buy rating with a $22 target. Both firms highlighted the proposed $6 billion wildfire liability cap under consideration in California’s legislature as a key factor in their assessments.
PG&E’s valuation metrics showed a trailing price-to-earnings ratio of 12.01 and a book value multiple of 1.13x. InvestingPro’s fair value estimate suggests a 21% upside potential to $20.10, though Wells Fargo’s $24 target remains above current market pricing.
The utility has outlined plans to return roughly $3 billion to shareholders through 2030 via buybacks, averaging $700 million to $800 million annually while offsetting capital expenditures. This strategy assumes stable regulatory and legal conditions, a premise complicated by recent legislative setbacks. California lawmakers recently blocked a proposal that would have shielded utilities like PG&E and Edison International from lawsuits by insurers over wildfire-related damages.
PG&E’s shares have traded below book value in recent sessions, reflecting investor caution amid unresolved liability exposures and regulatory uncertainty in the state.
