Investing.com -- UBS upgraded Edison International (NYSE:EIX) to "Buy" from "Neutral" arguing that the stock is undervalued given its wildfire exposure and the structure of California’s $21 billion wildfire fund. Though brokerage lowered its price target to $65 from $69 citing a greater wildfire discount but maintained a positive long-term outlook.
UBS noted that Edison’s valuation reflects a worst-case scenario of a $3.9 billion liability repayment to the wildfire fund, despite its base case assuming exposure of up to $1 billion from the Eaton (NYSE:ETN) Fire. A shift in investor sentiment could come as government support stabilizes the financial profile and regulatory decisions support earnings growth, the bank added.
UBS expects positive developments in early 2025, including progress on wildfire risk mitigation policies and rate case decisions that could reinforce Edison’s earnings trajectory. The firm’s valuation model incorporates multiple scenarios, including potential wildfire fund replenishment and a major fire in the absence of such funding.
Shares of Edison International were last up 1.2% in premarket trading.
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