Pacific Gas & Electric Price Prediction for Second Half of 2021
***THIS IS NOT FINANCIAL ADVISE. DO YOU OWN RESEARCH AND FORM YOUR OWN CONCLUSIONS.***
Historical Preface:
Having just come off an update on policy from a (un-surprisingly) hawkish federal reserve, it's been said that rates are unlikely to rise precipitously until 2023. The news of unlikely tapering sent many of the utilities stocks into a sharp short-term decline. I do predict these severe declines to be short term and utilities ($PCG included) will soon return to their established trends. For PG&E, the established trend is bearish.
Prediction:
My prediction for the remainder of the summer is the stock will likely struggle downward until it finds strong support around $9.00-$9.05 (see trended chart below). This downward pressure is a result of investors seeking ever higher returns in more speculative sectors throughout the summer. The less "sexy" sectors (Energy and Utilities) will likely languish until Fall. I also think the perception of Utilities has suffered since PG&E's and ERCOT's most recent gaffs; deserved or otherwise. ESG minded investors are avoiding these equities on a principled basis rather than financial. I anticipate this trend to eventually fade.
I will continue to add to my position at the $9.25-$9.30. Once a new strong support level is found I expect a quick, multi-week bull run to $15.00 during the last part of the year. I don't foresee prices exceeding $20.00 in 2021.
Pervasive Risks:
The location of PG&E's service area remains its biggest and most obvious risk. Most will cite the indebtedness as PG&E's largest negative mark but I don't consider this the case since the debt structure is understood and the re-payment plan is well defined. PG&E's location in California's most arid region will dominate the future risk of investing with this company. Obviously, there's little PG&E can do to rectify the issues introduced within its service area. These same challenges would be faced by any utility who exists in this location and the service outcomes would likely be the same. But, the companies leaders are taking steps to better alleviate concerns of future wildfire liabilities.
Future Confidence:
I like that PG&E understands its locational challenges and is working to mitigate them. Though I work in the Electrical utility industry, I don't know how the problems posed can be easily or cheaply addressed beyond better maintenance programs. PG&E seems to understand their position on that front is fragile and they need help finding other ways to meet their challenges; even if they don't understand what those challenges precisely are or how to mitigate them. This makes the close work they're doing with Palantir a very bullish indicator of PG&E's future success.
Final Remarks:
I remain very bullish in the long term.
Historical Preface:
Having just come off an update on policy from a (un-surprisingly) hawkish federal reserve, it's been said that rates are unlikely to rise precipitously until 2023. The news of unlikely tapering sent many of the utilities stocks into a sharp short-term decline. I do predict these severe declines to be short term and utilities ($PCG included) will soon return to their established trends. For PG&E, the established trend is bearish.
Prediction:
My prediction for the remainder of the summer is the stock will likely struggle downward until it finds strong support around $9.00-$9.05 (see trended chart below). This downward pressure is a result of investors seeking ever higher returns in more speculative sectors throughout the summer. The less "sexy" sectors (Energy and Utilities) will likely languish until Fall. I also think the perception of Utilities has suffered since PG&E's and ERCOT's most recent gaffs; deserved or otherwise. ESG minded investors are avoiding these equities on a principled basis rather than financial. I anticipate this trend to eventually fade.
I will continue to add to my position at the $9.25-$9.30. Once a new strong support level is found I expect a quick, multi-week bull run to $15.00 during the last part of the year. I don't foresee prices exceeding $20.00 in 2021.
Pervasive Risks:
The location of PG&E's service area remains its biggest and most obvious risk. Most will cite the indebtedness as PG&E's largest negative mark but I don't consider this the case since the debt structure is understood and the re-payment plan is well defined. PG&E's location in California's most arid region will dominate the future risk of investing with this company. Obviously, there's little PG&E can do to rectify the issues introduced within its service area. These same challenges would be faced by any utility who exists in this location and the service outcomes would likely be the same. But, the companies leaders are taking steps to better alleviate concerns of future wildfire liabilities.
Future Confidence:
I like that PG&E understands its locational challenges and is working to mitigate them. Though I work in the Electrical utility industry, I don't know how the problems posed can be easily or cheaply addressed beyond better maintenance programs. PG&E seems to understand their position on that front is fragile and they need help finding other ways to meet their challenges; even if they don't understand what those challenges precisely are or how to mitigate them. This makes the close work they're doing with Palantir a very bullish indicator of PG&E's future success.
Final Remarks:
I remain very bullish in the long term.
Do I think this blaze was caused by PG&E? Simply: No. PG&E has greatly improved their maintenance programs and have announced the (extremely expensive) burial of 10,000 miles of line in the most at risk areas of the system to fire. Even if this blaze was caused by a blown arrester or fuse link, the utility should not be blamed for natural operation of this equipment. That being said, PG&E qualifies for state relief for wildfire liabilities.
The common stock still looks very unattractive but, given their leadership in the right direction, I remain bullish in the long run.
A slight correction to the above price statement, PCG is not soundly below my prediction of $9.00 per share. I have a new target of $7.25 to add to my position.