This C Stock Forecast article was written by Aiden Chalem – Financial Analyst at I Know First.

Highlights

• Citigroup reported an EPS of 1.75, beating the consensus by 0.48. Effective cost management strategies drove this strong performance. A focus on high-margin business segments also contributed, helping offset a slight year-over-year revenue decline of 1.60%.
• In Q1 2024, Citigroup’s revenue surged to $43.82 billion, driving gross profit to $21.10 billion. This turned operating income positive at $4.54 billion, reflecting the company’s strong market presence and improved efficiency.
• For the rest of the 2024 fiscal year, Citigroup stock will likely experience varied performance. With a current value of $50 per share, Citigroup (C) has a projected average target price of $63.09, reaching as high as $86 and as low as $43.

Citigroup Inc (C), is a leading global financial services corporation. Based in New York City, Citi provides a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management. This article will explore Citigroup’s market position as well as give a forecast of their stock. 

Over the last couple of years, Citigroup has experienced a steady return on stock value, with a high of $80 and a low of $38.17. The 10-year return stands at 36.10%, while the 5-year return is -10.32%. This negative return over the past five years is primarily due to the impact of the COVID pandemic. Right before the pandemic, Citigroup had reached an all-time high, but the onset of COVID brought about significant challenges. Economic uncertainty, interest rate cuts by central banks, and heightened market volatility contributed to the sharp decline in Citigroup’s stock price. Despite these setbacks, the 1-year return is a positive 36.82%, reflecting a recovery in the market. The current market price of Citigroup’s stock is $64.03.

In the most recent fiscal quarter (FY24Q1), Citigroup reported an EPS of 1.75, beating the consensus by 0.48. Effective cost management strategies and a focus on high-margin business segments drove this strong performance, which helped offset a slight year-over-year revenue decline of 1.60%. The company generated $21.10 billion in revenue, indicating resilience in its core operations despite challenging economic conditions. This performance highlights Citigroup’s ability to adapt and maintain profitability through strategic operational adjustments.

In FY23Q4, Citigroup’s EPS was 0.84, surpassing the consensus by 0.15 despite a year-over-year revenue decline of 3.14%. This was achieved through stringent cost controls and a shift towards more stable revenue streams. Conversely, in FY23Q3, Citigroup reported a robust EPS of 1.52, beating expectations by 0.30, driven by an 8.81% year-over-year revenue increase to $20.14 billion. However, in FY23Q2, Citigroup narrowly missed the EPS consensus by 0.01 with an EPS of 1.37, due to a slight year-over-year revenue decline of 1.03%, reflecting the impact of market volatility and interest rate fluctuations. These mixed results underscore the importance of continuous adaptation and strategic focus in navigating economic uncertainties.

By looking at Citigroup’s balance sheet in the most recent data for the first quarter of 2024, Citigroup demonstrated a notable improvement in its financial performance. Revenue surged to $43.82 billion from $39.99 billion in the previous quarter, underscoring the company’s strong market presence and ability to capitalize on growth opportunities. This revenue growth translated into a gross profit of $21.10 billion, up from $17.44 billion, reflecting improved efficiency and cost management. Operating income also turned positive at $4.54 billion, a significant rebound from the previous quarter’s loss of $2.10 billion, indicating effective cost control and strategic focus on profitable segments.

Citigroup’s net income in Q1 2024 was $3.37 billion, a stark contrast to the loss of $2.90 billion in Q4 2023, demonstrating the company’s resilience and capability to recover swiftly from setbacks. Despite these gains, the company must remain vigilant, as the volatility in previous quarters indicates that challenges persist. The ability to maintain this momentum will be crucial for Citigroup, as consistent performance in revenue, operating income, and net income will reinforce investor confidence and support long-term growth.

The recent financial performance of Citigroup signifies a pivotal moment, reflecting resilience and potential for future growth. The substantial revenue increase and return to positive operating income indicate effective navigation through economic challenges. This robust recovery bolsters investor confidence and positions Citigroup well for sustained growth and stability. Looking forward, Citigroup is well-equipped to enhance market share and deliver consistent returns

Looking Into Citigroups Future

Citigroup is projected to experience significant value appreciation over the coming year. Analysts anticipate a substantial increase in the stock’s value, with prominent institutions like Bloomberg expressing optimism about Citigroup’s future performance. Mike Mayo, the managing director and head of U.S. large-cap bank research at Wells Fargo Securities, has repeatedly stated his belief that Citigroup’s stock has the potential to double within the next year. 

The accompanying image illustrates the recommendation trends for Citigroup, highlighting a strong consensus among analysts. As of July 2024, the recommendations include 3 strong buys, 7 buys, and 7 holds, with no sell or strong sell recommendations, further underscoring the positive sentiment towards Citigroup’s stock. It also shows optimism since we can see compared to previous years how more analysts are deciding to buy or hold stock, instead of selling.

In her third year as CEO, Jane Fraser aims for Citigroup to achieve significant financial gains in 2024. Key to this goal is the upcoming June 2024 Federal Reserve CCAR stress test, a critical evaluation that has previously challenged Citi. The results of this stress test could influence market perceptions and fluctuations, given Citi’s mixed historical performance in such assessments.

For this year’s CCAR test, several crucial expectations focus on Citi’s performance and potential outcomes for the financial institution. Citi anticipates its Stress Capital Buffer (SCB) to decrease to 4.1% from 4.3%, reflecting operational streamlining efforts. As of March 31, 2024, Citi’s Common Equity Tier 1 (CET1) capital ratio stands at 13.5%, comfortably above regulatory requirements. Additionally, Citi plans to raise its quarterly common stock dividend from $0.53 to $0.56 per share, pending board approval. The stress test scenarios envisage severe economic conditions, including a sharp rise in unemployment and significant market volatility.

Despite the severe hypothetical losses projected in the stress scenarios, Citi expects to maintain capital adequacy and continue its lending activities. The results underscore Citi’s strong balance sheet and liquidity, which support clients and sustain operations through challenging economic environments.

For the rest of the 2024 fiscal year, Citigroup stock will likely experience varied performance. With a current value of $50 per share, Citigroup (C) has a projected average target price of $63.09, reaching as high as $86 and as low as $43. This projection indicates a potential increase of up to 72%. Citigroup’s strategic initiatives and strong global market presence bolster this positive outlook for the company.

Citigroup’s P/E ratio of 19.61 is higher than its major peers. JPMorgan Chase’s is 12.54, and Bank of America’s is 14.42. This higher P/E ratio indicates that the market expects Citigroup to achieve higher future earnings growth compared to these competitors. However, a higher P/E ratio could also suggest that Citigroup’s stock might be overvalued relative to its earnings. Investors should consider this while weighing the company’s potential for growth and earnings performance.

The Price-to-Sales ratio is 1.85, lower than MUFG’s 3.18 and IBN’s 5.52, indicating undervaluation. A lower P/S ratio may suggest Citigroup’s stock is undervalued relative to its sales, attracting value investors. This suggests Citigroup generates sales at a relatively cheaper stock price compared to peers. This might present an investment opportunity if Citigroup’s sales continue to grow steadily over time.

The Price-to-Book ratio of 0.68 is lower than Goldman Sachs (1.52) and Morgan Stanley (1.86). A P/B ratio below 1 suggests the stock trades for less than the company’s net assets. This indicates the market may undervalue Citigroup’s equity, presenting a buying opportunity. Investors who believe in Citigroup’s undervalued assets and potential for improved returns might find this attractive.

Based on the relative valuation metrics, Citigroup appears to offer a mixed but promising investment opportunity for investors. Citigroup’s strategic initiatives, including digital expansion and cost management, position it well for growth opportunities. I am confident that Citigroup will yield strong returns in upcoming years due to its strategies. The company’s focus on expanding its digital services and improving operational efficiency indicates a promising future.

Conclusion

Long-term investors can view Citigroup as a promising opportunity. Consistent revenue growth, improved operational efficiency, and strategic initiatives aimed at expanding digital services indicate sustained profitability and stability. Short-term investors can also find value in Citigroup’s stock due to its recent performance and potential for significant appreciation. Positive sentiment among analysts and Citigroup’s resilience in navigating economic challenges position the company well to deliver strong returns both in the near and long term.

It is worth paying attention that the stock-picking AI of I Know First has a weak long signal on the one-year market trend forecasts, supporting my position for the C stock forecast. The light green for the short-term forecasts is weak bullish, while the green is a mild bullish signal for the one-year forecast.

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Please note-for trading decisions use the most recent forecast.