Seeking Alpha's EIX Buy Upgrade Contrasts with DeepValue's Cautious Wildfire Risk Assessment

What happened

A Seeking Alpha article published on February 17, 2026, upgrades Edison International (EIX) to 'Buy,' citing a technical breakout and attractive valuation ahead of Q4 earnings, with EPS guidance of $5.95–$6.20 for 2025 and a reaffirmed 5%–7% core EPS CAGR through 2028. The article argues that even with a 10% discount for wildfire liability, EIX appears compelling on earnings multiples, portraying near-term strength. However, the latest DeepValue master report rates EIX as 'WAIT' with a conviction of 3.5, emphasizing persistent wildfire overhangs, a BBB- rating with negative outlook, and cumulative losses of $11.4 billion with uncertainties around Eaton Fire recoveries. This divergence highlights that the Seeking Alpha upgrade may underweight deep-seated risks documented in regulatory filings, where management cannot estimate upper bounds for wildfire events and ratings are at risk of downgrade. Investors now face conflicting signals: one based on short-term earnings optimism, the other on long-term tail risk that could impair capital if wildfires or funding issues escalate.

Implication

The Seeking Alpha upgrade presents a bullish case focused on near-term earnings and valuation, but it risks overlooking concrete downside scenarios from wildfire liabilities, such as potential rating downgrades to high yield or poor recoveries on events like the Eaton Fire, which could force equity issuance or dividend cuts. DeepValue's 'WAIT' rating is grounded in detailed regulatory disclosures showing Wildfire Fund depletion concerns and recovery ratios as low as 35–60% for past settlements, indicating that earnings growth may not compensate for tail risk. If investors follow the upgrade without accounting for these risks, they could face significant capital impairment if another major fire occurs or regulatory support weakens, as implied by the bear case with a 25% probability and $50 implied value. Conversely, if wildfire risks are managed better than expected, there is upside to the base case $65, but DeepValue argues the expected return does not justify investment at current levels without clearer resolution on liabilities. Therefore, a prudent approach is to prioritize DeepValue's recommendation for a better entry near $55 after more disclosure on wildfire exposures, rather than chasing the upgrade based on technical or short-term factors.

Thesis delta

The Seeking Alpha upgrade to Buy does not fundamentally shift the investment thesis from DeepValue, which remains a WAIT due to unquantified wildfire liabilities and the need for a safer entry point. DeepValue's thesis is unchanged because the upgrade overlooks key risks like potential rating downgrades, Wildfire Fund capacity erosion, and uncertain cost recoveries that could materially impact earnings and valuation. Thus, investors should view this as a short-term optimistic view that conflicts with a more rigorous, risk-aware analysis, requiring no adjustment to the core thesis of waiting for clearer wildfire resolution.