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Worst Case Scenario: JPMorgan Says PG&E Still Worth $62/Share Amid Criminal Trial

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JPMorgan’s Christopher Turnure believes that the risks facing PG&E Corporation PCG are more than priced into the stock, which continues to trade at a meaningful discount to peers.

Turnure maintains an Overweight rating on the company, while lowering the price target from $66 to $65.

Investor Concerns

The analyst pointed out that despite higher interest in the stock year-to-date, many investors were still avoiding PG&E shares, driven by concerns regarding the criminal trial, the delayed outcome of the GT&S rate case and therefore the delayed hike.

Related Link: PG&E Named No. 2 Utility Among 100 Best Corporate Citizens For 2016

Turnure mentioned that investors also appeared to have concerns regarding the lack of visibility into the company’s long-term growth, as well as the “gas distribution OII and assorted ex Parte accusations.”

Worst Case Scenario

According to the JPMorgan report, the worst case scenario of maximum criminal fine being levied, along with a $200 million gas distribution OII fine, and taking into consideration the low end of PG&E’s rate base guidance, the stock valuation would come to $62 per share.

“Were the trial delay to last 3 more weeks to May 17, a 6-week trial would put the jury deliberation off to late June with a final fine determination in a guilty scenario taking several more weeks at the earliest,” Turnure stated.

Dividend Hike

Turnure expects a dividend hike potentially in September, following the outcome of the GT&S rate case outcome.

DateFirmActionFromTo
Apr 2016Deutsche BankUpgradesHoldBuy
Mar 2016BarclaysMaintainsOverweight
Feb 2016BarclaysMaintainsOverweight

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