Please ensure Javascript is enabled for purposes of website accessibility

Why Edison International's Shares Plunged 25% on Monday

By Travis Hoium – Nov 12, 2018 at 4:01PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Wildfires in California are causing a sell-off on Wall Street.

What happened 

Shares of Southern California utility Edison International (EIX 0.79%) fell as much as 25.4% in trading on Monday as wildfires raged over its territory. Losses had subsided somewhat near the end of trading, but the stock was still down 12.7% at 3:20 p.m. EST. 

So what

Southern California Edison, a utility subsidiary of Edison International, is the main electric utility for much of Southern California being ravaged by fires today and over the weekend. As communities are affected, so are the electrical assets the utility has in the ground, which is one reason investors are speculating that operations and earnings will be hurt by the fires. Insurance and ratepayers will certainly cover some of the asset losses from the fires, but there will likely be a financial impact for Edison International that's uncertain today. 

Wildfire burning a forest.

Image source: Getty Images.

The wild card in all of this is that investors are afraid that Edison International's electrical equipment may have caused the fire near Los Angeles, which could open it up to liabilities. But again, we don't know the scope of any potential costs. 

Now what

When natural disasters like this take place, it's not uncommon for stocks to react very violently. But the reaction may be overdone given the way ratepayers take on risks for utilities and how insurance can cover losses. I would watch where the fire originated and what's ultimately to blame, but this just looks like part of a panic sell-off of all California utilities today.  

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Edison International Stock Quote
Edison International
$64.23 (0.79%) $0.50

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.