Citigroup (C) May Be Poised To Move
Thursday, April 07, 2022 5:20 PM



Citigroup (NYSE: C), one of the largest banking institutions in the U.S .with a market cap just shy of $135 billion, is in the midst of an intriguing run right now. While there are many who will not allow Citi to live down the fiasco that was their operations just a couple of years ago, for those that can let go this may be a time to seriously look at Citi for the short term.

Upsides

Technical analysts will appreciate the relatively narrow trading range Citi has found itself in these past 3 months. Coming of 2011's high of $5.13 on January 20th, Citi has bounced between $4.85 to $4.90 on the high side, finding resistance around the $4.40 per share level. That, coupled with a current p/e ratio just above 13, positions Citi well within the banking industry norm.

The fun begins, and this is in part why several analysts have recently upgraded the stock, when we look at the forward p/e projections winding up this year and into 2012. With an estimated p/e of 8.73 for 2012, going forward Citi's stock could trade at nearly $7 a share and still be cheap, relative to the marketplace. Additionally, with earnings estimates for 2012 averaging an increase of 5x current figures, there is a lot of room for growth.

The stock price being as low as it is certainly won't hurt either, as investors find few barriers to entry. As opposed to JPMorgan Chase & Co. that's currently trading at $47.55 a share, Citi is fairly easy to get into without over committing portfolio dollars. Also, once the stock price hits $5 a share, the doors to institutional investing will fly open, increasing upside pressure.

Additional Thoughts

A couple notes on Citi worth considering; with the Government no longer an owner of Citi shares, the company may at last shed the remnants of the massive bail out that left investors seething. And make no mistake, investor sentiment can and does move markets, at least in the short term.

Citi's focus on the consumer markets going forward should position the company for growth as well. With their strong footing already established in the Asian and Latin American consumer markets, Citi should benefit as the oh-so-slow worldwide economic recovery continues to take hold.  

Considerations

It was in mid-January that Citi CEO Vikram Pandit went on record declaring 2012 as the year Citi returns to offering shareholders a dividend. What a difference a few months makes; Citi will offer a cash dividend to shareholders beginning in Q2. However, until they receive the okay from Treasury, The Fed and the FDIC, they are limited to 1 cent a share until 2012. With other banks like JPMorgan Chase, US Bank and Wells all raising their dividends, this is worth keeping an eye on to see if Citi petitions to lift the 1 cent a share restriction.

The dividend declaration comes in concert with Citi's announcement of a 10-for-1 stock split, effective May 6, that will reduce the number of shares outstanding from 29 billion to 2.9 billion, possibly adding further upside pressure.

It is also worth noting the impact of the Dodd-Frank Bill on Citi, as that is a concern for many investors exploring the financial services sector. Dodd-Frank will be a factor in how banks manage their business, particularly their lending business, going forward; there's no denying that. However, with the many of the changes delayed until 2012, we may not know the influence of the Bill for years to come.

Also a concern of some are the rumblings from the banking industry, Citi included, of implementing fees for many of the services consumers have come to expect for free. Services like checking accounts, fees for ATM usage and other means of generating fee income. While not a pleasant thought for consumers, these may prove to be positive revenue generating moves by the banking industry. The unknown factor is what, and how large a consumer whiplash effect this would have on banks.

Final Notes

It's not often we come across a stock that looks attractive to both fundamental and technical investors alike, but Citi may be just that. With the worst (finally) behind them, get ready to ride the Citigroup train to possibly substantial gains over the next 12 months. Also, mark your calendars for April 18, 2022 for Citi's Q1 earnings announcement. If the company is able to eek out earnings above current estimates of $0.10 per share, the Citi train may be leaving the station even earlier than scheduled.


 

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