On Monday, Xcel Energy Inc. (NASDAQ:XEL) received an upgrade in its stock rating by a Citi analyst, moving from Neutral to Buy. The analyst has also set a new price target for the company's shares at $71.
The decision to upgrade the stock comes as a result of increased confidence in Xcel Energy's position following the containment of the Smokehouse Creek fire. The analyst cites several factors for the positive outlook, including the near-complete containment of the fire, which has clarified the potential for liability.
The analyst's assessment of the potential liability is that it is likely to be less than the $500 million insurance coverage Xcel Energy holds. Additionally, the legal liability standards in Texas and Oklahoma, where Xcel operates, are considered ambiguous, which may result in the company not owing any liabilities related to the fire. The analyst further notes that Xcel Energy is a quality regulated utility operating in strong jurisdictions.
The upgrade also follows a significant drop in the company's stock value, which has seen a 20% decline year-to-date and approximately a 30% decrease since the analyst began coverage in 2020. The analyst believes that the current lower stock prices present a compelling opportunity to upgrade Xcel Energy's rating.
Xcel Energy's status as a regulated utility is highlighted as a positive aspect, providing a degree of stability and predictability in its operations.
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