PCG: Massive Transmission Spend Will Support Data Center Driven Demand Upswing

Analysts modestly increased their price target for PG&E, citing the stock's persistent valuation discount despite top tier expected EPS and rate base growth, improving wildfire risk profile, and a once in a generation demand uplift from data centers, which together support potential multiple expansion toward the low $20s per share range.

Analyst Commentary

Bullish analysts highlight that PG&E is still trading at a sizable discount to the utility sector, even as expectations for rate base and EPS growth move toward the top end of the peer group. They see this as a setup for valuation catch up.

Recent price target increases and ratings upgrades reflect growing confidence that wildfire risk is becoming more manageable and that legislative and regulatory constructs are slowly normalizing. This is viewed as improving visibility into future cash flows and capital returns.

At the same time, bearish analysts emphasize that California specific regulatory and political risks remain elevated, particularly around affordability and allowed returns. They argue this could cap multiple expansion even as fundamentals improve.

Taken together, Street views suggest a more balanced risk reward profile, with substantial upside dependent on disciplined execution of the capital plan, stable wildfire outcomes, and constructive outcomes in upcoming regulatory and legislative processes.

Bullish Takeaways

• Bullish analysts point to multiple recent price target hikes and an upgrade that move targets into the high teens to mid 20s per share. They argue the stock is undervalued relative to its growth and improving risk profile.
• They emphasize top tier expected rate base and EPS growth, supported by grid hardening and new generation investment. In their view, this can sustain high single digit earnings growth for years.
• Several notes highlight the structural demand uplift from data centers and broader electrification as a once in a generation driver of load growth. Analysts see this as supporting long dated capital deployment and earnings visibility.
• Improved wildfire funding mechanics and no near term equity needs, coupled with the potential for buybacks and a growing dividend, are seen as catalysts for both multiple expansion and total return.

Bearish Takeaways

• Bearish analysts stress that affordability concerns in California are driving pressure on allowed returns, with recent cost of capital proposals implying downside to ROE that could weigh on valuation.
• They remain cautious on the timing and durability of a permanent wildfire fund fix, viewing delays and residual tail risks as constraints on how far the valuation can re rate.
• Some note that even with a favorable growth backdrop, the regulatory environment may limit upside if policymakers prioritize bill relief over shareholder returns, leading to a more muted multiple.
• For now, more neutral voices prefer to wait for clearer legislative and regulatory outcomes around 2026 before assigning PG&E a premium valuation relative to other integrated utilities.

What's in the News

• PG&E outlined plans to invest $73 billion by 2030 in transmission upgrades to support surging power demand from data centers, linked to roughly 10 GW of expected new load over the next decade (Reuters).
• The company issued 2026 EPS guidance of $1.62 to $1.66, indicating about 9 percent growth from its 2025 midpoint and signaling continued confidence in its multi year earnings trajectory (company guidance).
• Management described the data center driven load growth as a key underpinning of its long term capital plan, supporting an expanded rate base and visibility into future returns (Reuters, company guidance).

Valuation Changes

• Fair Value Estimate remains unchanged at approximately $21.23 per share and continues to support a low $20s fair value range.
• Discount Rate has edged down slightly from about 6.96 percent to 6.96 percent, implying a marginally lower required return on equity.
• Revenue Growth is effectively unchanged at roughly 3.88 percent annually, indicating stable top line expectations.
• Net Profit Margin is essentially flat at about 14.25 percent, reflecting a consistent view of long term profitability.
• Future P/E is stable at around 14.5x forward earnings, signaling no material change in the assumed valuation multiple.