$HE Extremely Undervalued
fter the Maui County lawsuit against Hawaiian Electric Industries, Inc. (NYSE: HE), its shares plummeted by more than 65% and reached a 52-week low. That said, the company recently released a statement calling the lawsuit “factually and legally irresponsible” as it showed that it was not responsible for the fires – leading the stock to gain 45%. With the stock still far from its pre-lawsuit levels, HE stock’s current dip could be an opportunity for long-term investors given that it is severely undervalued at current levels.
HE Fundamentals
Maui County Lawsuit
After the devastating fire that killed at least 115 people, left over a thousand missing, and would take $6 billion to cover the losses, more than 8 lawsuits have been filed against HE, including one from Maui County and its shareholders amongst others. The lawsuits allege that the company’s protocols and procedures were inadequate since it failed to de-energize its powerlines to prepare for the high winds and temperature that caused the fire to start.
After the lawsuits, HE stock dropped more than 65%, since if it was found liable for the fire, it would probably have to pay the $6 billion needed to cover the losses and compensate the victims. That would be disastrous for the company since it only has $320 million in cash and around $1.37 billion in marketable securities, which would add up to around $1.7 billion, well below the $6 billion in liabilities it could face.
HE Redemption
However, that may not be the case anymore since the company shared a press release on August 28th refuting Maui County’s claims that it is liable for the fires. While the company admitted that a fire was caused by power lines that fell due to the winds, it also said that the fire was 100% contained according to the Maui County Fire Department. Furthermore, it has also been said that at the time of the second fire, which started in the afternoon, all lines in the area were de-energized which means it couldn’t be the reason for the fire.
After this press release, HE stock jumped more than 40% and is currently up almost 50% at $14. That said, the stock remains so far from its pre-lawsuit PPS of $32, which means that it can gain up to 130% since it is extremely undervalued at current levels.
Undervalued Stock
If HE were to be compared to other electrical utility stocks, it seems like it is extremely undervalued. After the price drop, the stock is trading at a 27 P/E ratio, which is almost three times below other utility electrical companies. This means that the could climb back to around $42 from its current PPS of $14 – which makes the current dip a perfect opportunity to go long on the stock.
HE Financials
In its Q2 2023 report, HE’s assets increased 1.4% QoQ from $16.2 billion to $16.5 billion due to an increase in its cash and cash equivalents, which increased 58% QoQ from $200 million to $314 million since it has reported operating cash flow of $190 million. HE’s total liabilities slightly increased by 1.5% QoQ from $14 billion to $14.2 billion due to an 8% increase in its long-term debt from $2.38 billion to $2.57 billion.
HE’s Revenue stayed relatively flat at around $895.6 million. The same can be said about its operating costs, which increased by only 0.9% from $808 million to $802 million, which contributed to the operating income of $92 million, representing a 6% increase YoY. All of this amounted to a net income of $55 million – a 3% increase YoY.
Technical Analysis
HE stock’s trend is neutral, with the stock trading in a sideways channel between $9.23 and $14.62. Looking at the indicators, the stock is trading above the 50 and 21 MAs which is a bullish indication, and below the 200 MA which is a bearish indication. Meanwhile, the RSI is approaching overbought at 62 and the MACD is approaching a bearish crossover. It is also worth mentioning that there’s a gap around the $32 mark that may be filled in the future given that the company may not be found liable for the fires.
As for the fundamentals, the recent press release from HE was a major catalyst for the stock since the company showed that it was not responsible in any way for the fires. In light of this, bullish investors could wait for the stock to successfully break resistance with a pullback to go long in anticipation of the stock recovering to its pre-lawsuit levels.
HE Forecast
HE stock lost more than 65% due to Maui County accusing it of being liable for the fire that started since it didn’t de-energize its power lines in preparation for the high wind and temperature. That said, the company released a press release highlighting that its power lines had already been de-energized for almost six hours at the time the fire happened, which means that it probably was not the reason for the fire. The stock is now trading more than 56% below its pre-lawsuit price, which is a sign that it could be extremely undervalued at the moment, especially with its P/E ratio far below its competition.
HE Fundamentals
Maui County Lawsuit
After the devastating fire that killed at least 115 people, left over a thousand missing, and would take $6 billion to cover the losses, more than 8 lawsuits have been filed against HE, including one from Maui County and its shareholders amongst others. The lawsuits allege that the company’s protocols and procedures were inadequate since it failed to de-energize its powerlines to prepare for the high winds and temperature that caused the fire to start.
After the lawsuits, HE stock dropped more than 65%, since if it was found liable for the fire, it would probably have to pay the $6 billion needed to cover the losses and compensate the victims. That would be disastrous for the company since it only has $320 million in cash and around $1.37 billion in marketable securities, which would add up to around $1.7 billion, well below the $6 billion in liabilities it could face.
HE Redemption
However, that may not be the case anymore since the company shared a press release on August 28th refuting Maui County’s claims that it is liable for the fires. While the company admitted that a fire was caused by power lines that fell due to the winds, it also said that the fire was 100% contained according to the Maui County Fire Department. Furthermore, it has also been said that at the time of the second fire, which started in the afternoon, all lines in the area were de-energized which means it couldn’t be the reason for the fire.
After this press release, HE stock jumped more than 40% and is currently up almost 50% at $14. That said, the stock remains so far from its pre-lawsuit PPS of $32, which means that it can gain up to 130% since it is extremely undervalued at current levels.
Undervalued Stock
If HE were to be compared to other electrical utility stocks, it seems like it is extremely undervalued. After the price drop, the stock is trading at a 27 P/E ratio, which is almost three times below other utility electrical companies. This means that the could climb back to around $42 from its current PPS of $14 – which makes the current dip a perfect opportunity to go long on the stock.
HE Financials
In its Q2 2023 report, HE’s assets increased 1.4% QoQ from $16.2 billion to $16.5 billion due to an increase in its cash and cash equivalents, which increased 58% QoQ from $200 million to $314 million since it has reported operating cash flow of $190 million. HE’s total liabilities slightly increased by 1.5% QoQ from $14 billion to $14.2 billion due to an 8% increase in its long-term debt from $2.38 billion to $2.57 billion.
HE’s Revenue stayed relatively flat at around $895.6 million. The same can be said about its operating costs, which increased by only 0.9% from $808 million to $802 million, which contributed to the operating income of $92 million, representing a 6% increase YoY. All of this amounted to a net income of $55 million – a 3% increase YoY.
Technical Analysis
HE stock’s trend is neutral, with the stock trading in a sideways channel between $9.23 and $14.62. Looking at the indicators, the stock is trading above the 50 and 21 MAs which is a bullish indication, and below the 200 MA which is a bearish indication. Meanwhile, the RSI is approaching overbought at 62 and the MACD is approaching a bearish crossover. It is also worth mentioning that there’s a gap around the $32 mark that may be filled in the future given that the company may not be found liable for the fires.
As for the fundamentals, the recent press release from HE was a major catalyst for the stock since the company showed that it was not responsible in any way for the fires. In light of this, bullish investors could wait for the stock to successfully break resistance with a pullback to go long in anticipation of the stock recovering to its pre-lawsuit levels.
HE Forecast
HE stock lost more than 65% due to Maui County accusing it of being liable for the fire that started since it didn’t de-energize its power lines in preparation for the high wind and temperature. That said, the company released a press release highlighting that its power lines had already been de-energized for almost six hours at the time the fire happened, which means that it probably was not the reason for the fire. The stock is now trading more than 56% below its pre-lawsuit price, which is a sign that it could be extremely undervalued at the moment, especially with its P/E ratio far below its competition.
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