We came across a bullish thesis on PG&E Corporation (PCG) on Substack by Acid Investments. In this article, we will summarize the bulls’ thesis on PCG. PG&E Corporation (PCG)’s share was trading at $15.88 as of Feb 27th. PCG’s trailing and forward P/E were 13.81 and 10.66 respectively according to Yahoo Finance.
A wide shot of a sprawling natural gas pipeline system, representing the company’s energy infrastructure.
PG&E Corp (PCG) has been unfairly punished in the wake of the recent Los Angeles wildfires, presenting a compelling investment opportunity. The fires, which devastated the Palisade and Eaton regions, have been among the most costly in U.S. history, with damage estimates ranging between $50 billion and $150 billion. While the potential causes are still under investigation—ranging from power line failures to rekindled embers or arson—the primary concern for investors is whether utilities will be held responsible for damages. Edison International (EIX), which operates in the affected regions, is already facing lawsuits over alleged faulty equipment igniting the fire. As a result, its stock plunged by ~$19 per share, erasing approximately $7.4 billion in market capitalization. However, PCG, which has no direct exposure to the fire zones, suffered an even greater absolute equity loss of ~$8 billion, despite having no confirmed liability in this case.
PCG’s previous bankruptcy in 2019 was triggered by liabilities from the Camp Fire and other Northern California wildfires, leading to a substantial restructuring. However, today’s situation is fundamentally different. The Palisade and Eaton fires occurred well outside of PG&E’s service territory, making it highly unlikely that the company will bear financial responsibility. Yet, the market has seemingly lumped PCG together with EIX, disproportionately punishing its stock. If the market were to assign even a minimal probability of liability to PCG, the selloff might be justified—but in this case, the decline appears to be an overreaction.
Despite fears of increased wildfire risks due to climate change and “weather whiplash,” the broader utilities sector has remained resilient. The S&P utilities index has barely reacted, suggesting that the market’s risk perception is not industry-wide but rather specific to companies involved in prior wildfire liabilities. While utilities could face a higher risk premium going forward, PG&E’s management has taken substantial steps to mitigate wildfire risks, improving infrastructure and implementing preventative measures.
PCG is guiding for $1.50 EPS in 2025, with projected 10% annual growth—an exceptional rate for a utility. Compared to peers such as EIX, DUK, AEE, and AEP, which project 5-8% EPS growth, PCG stands out as an outlier in terms of earnings expansion. Historically, utility stocks have traded at a median P/E of 17.5x, though rising interest rates may now compress valuations to the 13-15x range. Even at the lower end of this valuation spectrum, PCG’s fair value suggests a return to its pre-selloff price of ~$20 per share or higher. Given the company’s strong fundamentals and lack of direct liability in the LA wildfires, this presents a compelling risk/reward opportunity for investors.
PG&E Corporation (PCG) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 74 hedge fund portfolios held PCG at the end of the third quarter which was 49 in the previous quarter. While we acknowledge the risk and potential of PCG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PCG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.