Hawaiian Electric Industries was upgraded to Wells Fargo as ‘risk/reward remains high’ By Investing.com

Analysts at Wells Fargo upgraded Hawaiian Electric Industries (NYSE: ) Electric Industries ( HE ) to Equal Weight from Underweight on Friday, citing increased risks associated with a possible fire settlement.

The decision comes as HE shares are down about 20 percent from Wells Fargo’s probability-weighted price target of $14 a share, sending analysts on edge.

Wells Fargo highlighted several factors driving the upgrade. First, “provisional settlement details revealed that HE’s share is higher than initial reports,” which contributed to the stock’s decline.

Additionally, the company’s $1.71 billion charge in the second quarter sparked concerns about its ability to continue as a going concern. This, combined with a recent court ruling allowing the interim settlement to move forward, has left the future of HE shares uncertain.

Analysts noted that while a resolution is likely, the way forward suggests a “wide range of values ​​for HE shares.” While there is significant upside potential if a settlement is completed, Wells Fargo expressed concern about limited visibility and lingering bankruptcy risk, especially given the implications of the substantial Q2 charge.

The memo also noted that insurers involved in the settlement may be willing to settle for $1.0-1.2 billion, compared to the $600 million initially offered.

Factors that could lead to a finalized settlement are said to include insurance providers accepting lower-than-expected attorneys’ fees or defendants, including HE, contributing more to the settlement.

Given the high degree of risk and uncertainty, Wells Fargo chose to take a more cautious stance, converting HE to Equal Weight, while acknowledging the potential for a deal in the coming weeks.