BMO Capital downgrades PG&E stock rating on wildfire concerns

BMO Capital has lowered its rating on PG&E Corporation's stock to Market Perform from Outperform, reducing its price target from $28.00 to $21.00. The firm has adjusted its liability assessments for wildfire risks, exceeding the 20% transmission and distribution liability cap for fires beyond 2030 due to a depleted fund and eliminated liability cap.

Despite the downgrade, BMO Capital believes PG&E's stock remains undervalued, as it now trades at a notable discount to its peers, with a valuation of around 8 times earnings. The company's recent second-quarter core earnings of $0.40 per share exceeded expectations, but revenue of $5.9 billion fell short of the anticipated $6.12 billion.

PG&E maintains its full-year core EPS guidance of $1.64 to $1.66. Meanwhile, UBS has maintained its Buy rating and $22.00 price target for PG&E, highlighting progress in California wildfire legislation, particularly a proposed $6 billion liability cap. However, PG&E's stock range-bound outlook persists without visible improvements in the state's wildfire framework, which could diminish investor interest.