Shares of PG&E Corporation (PCG) rose 4.65% more in Thursday’s pre-holiday trading session after the San Francisco-based company announced it had emerged from bankruptcy. The public services giant, which requested the reorganization of Chapter 11 in January 2019, said Wednesday that it had paid $ 5.4 billion and part of its shares in a trust established for victims of forest fires affected by its outdated infrastructure.
Acting PG&E CEO Bill Smith acknowledged that the milestone was a step in the right direction, but insisted that the company had more work to do. “Our appearance in Chapter 11 marks only the beginning of the next era of PG&E, as a fundamentally enhanced company and the safe and reliable utility that our customers, communities and California deserve,” said Smith, according to MarketWatch.
Because the restructuring plan obtained approval from the US bankruptcy court before June 30, the company now has access to a $ 21 billion insurance fund established by California to cover the damages caused By future catastrophic forest fires. As of Thursday’s close, PG&E is trading down 13% on the year, yielding below the average for the regulated utilities industry at around 3%.
Analyst view
Anticipating a successful exit from bankruptcy, UBS analyst Daniel Ford upgraded the shares to ‘Buy’ from ‘Neutral’ in May and raised its 12-month price target from $ 14 to $ 15, indicating nearly 60% higher since closing at $ 9.45 on Thursday.
The analyst also noted that PG&E should reach its long-term growth target of 7-8%, adding that the company’s revenue could grow at an even higher rate. Ford concluded by saying that it sees a limited downside to equities given a capital backing commitment from a consortium of private investors.
Elsewhere on Wall Street, the consensus is divided equally with 6 ‘Buy’ and 6 ‘Sell’ ratings. However, the stock does not have ‘Strong Buy’ or ‘Strong Sell’ ratings, indicating a lack of conviction on the part of research analysts. Interestingly, most of the updates have occurred in the last three months leading up to the bankruptcy outcome.
Technical perspective
PG&E stocks have swung within a symmetrical textbook triangle since late February, with neither bulls nor bears able to gain the promotion. However, buyers applauded the company’s successful exit from bankruptcy yesterday, pushing the price up from the triangle’s lowest trend line as volume increased. The ongoing bullish momentum in the coming weeks could see a test of February’s double high around $ 18. Conversely, a breakdown through current levels may cause a pandemic settlement low to drop to $ 6.25.
This article was originally published on FX Empire
