Expect Powerful Gains from Edison International in 2026

This time last year, California was engulfed in devastating wildfires.

Thousands of acres of property were destroyed, and it didn’t take long for fingers to point at Edison International (“EIX”). Consequently, the stock plummeted over 30% over a matter of days, wiping out almost $10 billion in the stock’s market value.

The investigation into whether EIX’s equipment played a role in igniting the flames remains ongoing. CEO Pedro J. Pizarro told the Los Angeles Times in April that the leading cause of the fire appears to have been an old transmission line that became reenergized, a process known as induction.

Nevertheless, while the company acknowledges that its equipment could ultimately be found to have contributed to the fire, the state’s $21 billion wildfire insurance fund is available to cover damages so long as the company acted “prudently”. Edison plans to use its own insurance for the first $1 billion of claims and then tap the fund for amounts above that threshold.

In September, California created a new $18 billion wildfire fund, showing the state’s commitment to support utility companies. The new legislation allows utility companies to issue bonds to pay for claims (including last year’s Eaton Fire) if the first $21 billion fund runs out of money.

We expect the conclusion of the investigation this summer – and a statement that EIX behaved “prudently” – to remove a cloud of uncertainty and drive the stock higher. (Disclosure: Clients, Jeff Pollock, and Sunni Schneider have a direct and indirect financial interest in Edison International as shareholders).

At $60/share, EIX trades nearly 30% cheaper than its historical valuation, roughly aligning with the earnings multiple the company held during the 2009 financial crisis. 

Management is forecasting 5-7% annual earnings growth through 2028, which could bring the stock to over $90/share if historical multiples are restored, representing 50% upside from current levels. We’re confident the team can deliver this growth because of its track record for meeting or exceeding guidance every year since 2004. 

Meanwhile, we’re being paid to wait with a 5.8% dividend yield. Not only was it recently increased by 6% last month, but its board has raised the dividend for 22 consecutive years at a 7% compounded annual growth rate.

Once the investigation concludes later this year, we expect powerful gains in this stock.

-written by Jeff Pollock