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Utilities are moving sharply higher and can add to their gains. How to trade the sector
Published
5 months agoon
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admin
As markets enter another phase of uncertainty from escalating trade tensions, utilities have offered defensive positioning against the volatility. PG & E stands out as one of the few utilities demonstrating both improving fundamentals and technical leadership. The reaffirmation of 2025 guidance, validated wildfire mitigation progress and expanding data-center pipeline support a compelling case for steady growth. With sector rotation tailwinds and a more transparent path to sustainable earnings, PCG offers investors a defensive growth profile with a confirmation for further upside. Trade timing & outlook PCG has broken decisively above its 200-day moving average and confirmed the breakout by retesting the $16 level as new support. This strength amid broader market volatility reinforces sector leadership, with relative performance improving versus both the S & P 500 and the Utilities ETF (XLU) . A sustained move above this support level opens the path toward our $21 upside target. Fundamentals PG & E remains attractively valued relative to peers, supported by strong rate-base growth and improving regulatory alignment: Forward PE Ratio: 9x vs. sector average 18x Expected EPS Growth (FY 25): +9%-10% YoY Expected Revenue Growth (FY 25): +4%-5% YoY Net Margins : 10% Bullish thesis Technical momentum aligned with sector strength: PCG’s breakout confirms a trend reversal, supported by the utilities sector’s renewed relative strength as investors seek defensive exposure. Defensive leadership in a volatile market: With rising geopolitical risk and a flatter yield curve, utilities’ predictable earnings make the sector an attractive refuge. Improving operational outlook: Continued execution on wildfire mitigation and infrastructure modernization has enhanced earnings stability. Attractive valuation: Trading at a meaningful discount to peers despite improving fundamentals and lower balance-sheet risk. Options trade With an IV Skew favoring a simple long options strategy, I’m buying the December $16 Call @ $1.30 Debit. The maximum reward is unlimited if PCG continues to rise above $16. The maximum risk is $130 per contract, the premium paid. The breakeven point for this trade is $17.30. View this Trade with Updated Prices at OptionsPlay This trade aligns with the technical breakout and sector momentum, offering defined risk with upside potential if PCG continues to benefit from defensive rotation and sector-leading relative strength. DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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