Palantir Is Helping California Manage Wildfires

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These days, wildfires burning in California get named and tracked a little like Atlantic hurricanes. Whether it’s the Mosquito fire, Coyote fire, or something else, the fires create big problems for utilities—and utility customers—who are also beset by record heat. All that has the power industry turning to

Palantir Technologies

to help them manage the growing risks.

Citi utility analyst Ryan Levine recently spent some time out West. “As we enter September with record high temperatures …we are entering a now familiar season of blackouts, wildfires, and calls for more power and preparations for future events,” wrote the analyst in a Thursday report, reviewing his trip.

After the visit, Levin was most impressed with emergency preparedness gains made by

Edison International

(ticker: EIX), which owns the large power provider Southern California Edison.

“Edison is much more prepared in 2022 than in 2021 …despite external fire risks being similar to last year,” wrote Levine. Edison “implemented new technology (Palantir), new communication strategy, new coordination with local fire experts, and has a better understanding of prudent electric line outage de-energing strategies, and weather/moisture/heat/wind conditions on system.”

There’s a lot to do mitigate fire risks. Palantir (PLTR) sticks out in his assessment. The company offers what it calls operational artificial intelligence to help manage the complexity. Palantir’s technology even creates a “meta-constellation” of satellites that aggregates and analyzes imagery to help utilities and first responders.

Levine adds that Edison’s emergency response center is now near the level of

Sempra

(SRE) and ahead of

PG&E

(PCG). Those two also have significant California operations.

Better wildfire management, of course, means less risk for utility and utility stocks that have significant business in California. Lower fire risk is one reason Levine rates Edison shares Buy. He also believes investment to improve transmission lines and add fire-resistant electricity poles will yield higher earnings down the road. (Regulated utilities are allowed to earn a return on approved investments.)

His Edison stock price target is $79 a share. Edison closed Thursday trading at $68.53.

Levin also rates

PG&E

shares, which closed at $12.83 on Thursday, a Buy with a $14 price target.

Sempra
,
which closed at $172.94, have a Hold rating and $171 price target.

Levine, of course, doesn’t cover Palantir. It’s a high-growth, software and data analysis platform provider. Shares trade for about 42 times estimated 2023 earnings and the stock doesn’t pay a dividend. (Edison and Sempra stocks yield 4.1% and 2.7%, respectively. PG&E stopped paying a dividend in 2017.)

Palantir stock isn’t that popular. Overall, only four of 14, or about 29%, of analysts that cover the stock rate shares Buy. The average Buy-rating ratio for stocks in the

S&P 500
is about 58%.

The average analyst price target is about $11 a share, some 46% higher than recent trading levels. That return looks attractive partly because analyst price targets tend to lag the stock market. Palantir shares are down about 59% year to date. Rising interest rates have sapped some investor enthusiasm for more richly valued, high-growth stocks. Palantir falls into that category.

But it can still help keep the fires at bay.

Write to Al Root at [email protected]