PG&E Shares Jump After Emerging From Bankruptcy

PG&E Corporation (PCG) shares powered 4.65% higher in Thursday’s pre-holiday trading session after the San Francisco-based company announced it had emerged from bankruptcy. The embattled utilities giant, which filed for Chapter 11 reorganization in January 2019, said Wednesday it had paid $5.4 billion and a portion of its stock into a trust established for wildfire victims impacted by its aging infrastructure.

PG&E’s interim CEO Bill Smith acknowledged the milestone was a step in the right direction but insisted the firm had more work to do. “Our emergence from Chapter 11 marks just the beginning of PG&E’s next era — as a fundamentally improved company and the safe, reliable utility that our customers, communities, and California deserve,” Smith said, per MarketWatch.

Because the restructure plan gained approval from the U.S. bankruptcy court by June 30, the utility now has access to a $21 billion insurance fund set up by California to cover damage caused by future catastrophic wildfires. Through Thursday’s close, PG&E trades down 13% on the year, underperforming the regulated electric utilities industry average by around 3%.

Analyst View

Anticipating a successful move out of bankruptcy, UBS analyst Daniel Ford upgraded the stock to ‘Buy’ from ‘Neutral’ in May and lifted his 12-month price target from $14 to $15 – indicating almost 60% upside from Thursday’s $9.45 close.

The analyst also noted that PG&E should achieve its long-term growth target of between 7- and 8%, adding that the firm’s income could grow at an even higher rate. Ford concluded by saying he sees limited downside in the stock given an equity backstop commitment by a consortium of private investors.

Elsewhere on Wall Street, the consensus sits evenly split with 6 ‘Buy’ ratings and 6 ‘Sell’ ratings. However, the stock has no ‘Strong Buy’ or ‘Strong Sell’ ratings, indicating a lack of conviction from research analysts. Interestingly, most of the upgrades have come in the past three months leading up to the bankruptcy outcome.

Technical Outlook

PG&E shares have oscillated within a textbook symmetrical triangle since late February, with neither the bulls nor bears able to gain the ascendancy. However, buyers cheered the company’s successful climb out of bankruptcy yesterday, driving price higher from the triangle’s lower trendline on rising volume. Ongoing bullish momentum in the weeks ahead could see a test the February double top around $18. Conversely, a breakdown through current levels may spark a fall to the $6.25 pandemic selloff low.