Investing.com -- Bank of America downgraded PG&E Corp. to Neutral from Buy on Tuesday, saying California's latest wildfire legislation failed to provide the durable liability and financing framework needed to support the utility's ambitious investment plans.

BofA cut its price objective to $13 from $24, arguing that Senate Bill 492 improves protections for wildfire survivors but leaves key utility risks unresolved. The legislation accelerates compensation, limits claim speculation, strengthens executive accountability and establishes a statewide wildfire mitigation strategy, but does not materially reform utility liability, insurance subrogation or inverse condemnation.

The downgrade marks a sharp shift in BofA's investment view. PG&E's existing $73 billion capital plan through 2030 and target for more than 9% annual earnings-per-share growth from 2027 to 2030 were based on a more favorable wildfire liability framework. BofA now assumes the company will remove $7.3 billion from its roughly $23 billion of capacity and new-business investments, although it stressed that this is its own modelling assumption rather than company guidance.

The reduced investment would lower projected EPS growth to about 7% through 2030, with BofA forecasting EPS of $1.78 in 2027 and $1.90 in 2028, versus its previous estimates of $1.79 and $1.96. The firm expects safety, reliability, compliance and other required spending to remain protected.

BofA said the capital reduction could instead shift the utility toward a higher-income profile. It assumes the $7.3 billion of foregone investment is returned to shareholders between the third quarter of 2026 and the fourth quarter of 2030, potentially lifting the dividend yield to about 6.5% and the payout ratio to roughly 43%-50%. It cautioned, however, that PG&E has not announced such a plan.

The legislation also leaves the Wildfire Fund as a central vulnerability, with BofA saying it does not provide the long-term loss-absorbing capacity or durability PG&E believes is necessary to attract affordable capital. The unresolved framework could also make progress toward investment-grade credit ratings less certain.

BofA said PG&E's investor update on Wednesday will be the next key catalyst, with investors looking for details on any changes to capital spending, growth targets and shareholder returns. A smaller-than-expected capital reduction or continued commitment to the 9%-plus growth target could support the shares, while a deeper cut could weigh on earnings expectations.

At the price used in BofA's analysis of $13.27, its new $13 price objective implies about 2% downside, partly offset by a projected dividend yield of 6.6%, for potential total return of about 4.5%.