PCG

Publicly traded companies mentioned herein: PG&E Corp (PCG)

Highlights

The presenter is long shares of PG&E Corp (PCG), having established the position in the low $40s after the sell off on fears about its liability for numerous California wildfires in late 2017. The stock reacted positively to the news that Governor Brown supports a legislative solution, saying the administration will work closely with legislative leaders and the Joint Legislative Committee on Emergency Management to, “Update liability rules and regulations for utility services in light of changing climate and the increased severity and frequency of weather events.” With the stock in the mid-$40s, there’s substantial near-term upside potential for shareholders if inverse condemnation is addressed near-term (i.e., there is an upcoming court case - expected to be in mid-April - and other proceedings in CA where progress can potentially be made within the next 2 - 3 months). Free-and-clear of the issue, the presenter sees the stock worth at least $68 in 12-18 months. This base case assumes a conservative 16x multiple on his $4.25 EPS forecast for 2020.