Investing.com - Wolfe Research has upgraded its investment stance on Xcel Energy (NASDAQ:XEL), seeing the damage down to the electric utility’s market capitalization by the recent fire in Texas as overplayed.
Wolfe upgraded its stance to ‘outperform’ from ‘peer perform’, with a 12-month price target of $58, offering upside of just under 14% from Friday’s $51.02 close.
Xcel Energy acknowledged on Thursday that its facilities likely started the Smokehouse Creek fire, a blaze which has burned over 1 million acres since erupting last month, the largest wildfire in recorded Texas history.
The company faces at least two lawsuits claiming it negligently failed to properly maintain electrical infrastructure linked to the blaze, which it denies.
Xcel also faces hundreds of lawsuits in Colorado, where its power lines have been blamed for the costliest wildfire on record in the state, the Marshall Fire. The company again denies blame.
Xcel’s stock nosedived after it disclosed potential exposure for damages resulting from the Smokehouse Creek Fire in Texas, dropping over 13% this month, with litigation still pending in the Marshall Fire in Colorado.
“However, we think that the TX fire damages risk is overdone and the figure likely proves to be under XEL's $500M insurance policy coverage for 2024,” Wolfe analysts said, in a note dated March 10.
Xcel’s involvement in the Marshall Fire is also questionable, Wolfe added.
“Future fire risk likely keeps XEL below prior premiums. But the current 10% discount is an attractive entry point for an otherwise high-quality utility,” Wolfe said.