Jefferies reiterated its Underperform rating and $13.25 price target on Hawaiian Electric (NYSE: HE), citing continued structural challenges despite progress on regulatory issues.
The firm noted that the company has transitioned from facing existential wildfire-related risks to a phase of regulatory normalization, but said the next stage of recovery is more complex.
Jefferies highlighted a proposed $170 million rebasing plan aimed at addressing an approximately 280 basis point return-on-equity gap beginning in 2027. However, the firm cautioned that even full regulatory approval would not be sufficient to restore earnings power without disciplined cost management and favorable performance incentive mechanism (PIM) outcomes.
The analyst also pointed to Act 258 liability cap rulemaking as a critical credit catalyst, though the process remains in early stages and is expected to take 18 to 24 months to complete.
Jefferies maintained that the stock’s current valuation appears difficult to justify based on underlying fundamentals. The firm added that Hawaiian Electric has not taken advantage of its relatively elevated share price to address financing needs through equity issuance.
The disconnect between valuation and fundamentals has widened, with shares rising from around $11 to above $14 over the past year, even as the company’s structural challenges have remained largely unchanged.
