Utility Stocks Crash on California Wildfire Legislation Fears

Utility stocks PCG and EIX suffered significant losses on Monday after California's latest wildfire legislation failed to provide adequate financial protections for investors. BMO Capital downgraded PG&E to 'Market Perform' from 'Outperform', cutting its price target to $21 from $28, citing exposure to 'open-ended wildfire-related tail risk'. Mizuho also downgraded Edison International to 'Neutral' from 'Outperform', reducing its target to $70 from $86.

The legislation, known as Senate Bill 492, aims to improve wildfire prevention and preparedness, but Wall Street remains concerned about the financial implications. PG&E acknowledged that the bill would help victims recover but noted that it does not address financing risks or create a durable framework for investment control.

Retail investors on Stocktwits, however, are calling the selloff an 'overreaction', with sentiment remaining 'extremely bullish' for PCG and flipping to 'bullish' for EIX. Despite the crash, analysts warn that utilities and their shareholders remain exposed to severe wildfire liabilities.