Xcel Energy seen as undervalued as UBS lifts price target Proactive uses images sourced from Shutterstock
Xcel Energy Inc (NASDAQ:XEL) had its price target raised to $91 from $89 by UBS analysts who say the stock continues to offer upside driven by earnings growth visibility and what it views as an overly discounted assessment of wildfire-related risk.
The revised target implies about 12% upside from recent trading levels near $81 and reflects higher valuation assumptions for the US utility sector.
UBS wrote that it now applies a premium multiple to ‘Buy’-rated Xcel relative to the broader utilities group, based on expectations for continued execution on its long-term capital investment programme and improving regulatory clarity.
The analysts continue to see Xcel as one of the stronger growth profiles in the regulated utilities space, forecasting earnings per share growth above 9% annually. That outlook is supported by a substantial capital expenditure plan spanning renewable generation, transmission buildouts, and grid modernization, along with incremental demand from large-load customers such as data centres.
A key focus of the report is wildfire risk, particularly in Colorado and Texas, where dry conditions have heightened investor concerns. UBS acknowledged the company has experienced two fire-related incidents over the past 4.5 years, resulting in settlements of about US$356 million in net liability.
However, it argued that investor sentiment is assigning an overly punitive valuation impact, estimating the market may be pricing in wildfire exposure equivalent to roughly 1% to 2% of market capitalization.
The company has deployed mitigation measures, including pre-emptive public safety power shut-offs and enhanced powerline safety settings intended to reduce ignition risk during extreme weather conditions. UBS said these tools, combined with regulatory mechanisms, help limit downside exposure.
Beyond risk factors, UBS highlighted additional upside from Xcel’s roughly US$60 billion capital investment programme. This includes renewable energy expansion in Colorado, major transmission projects in regional markets, and potential incremental load growth tied to a large data centre agreement in its Northern States Power service territory. The analysts noted that some of these opportunities could enhance earnings depending on regulatory approvals and financing structures.
Upcoming regulatory decisions in Colorado and Minnesota could also serve as catalysts, with rate case rulings expected later in April involving multi-hundred-million-dollar requested increases and returns on equity above current allowed levels. UBS also noted Xcel’s recent track record of regulatory settlements as a factor supporting earnings stability.