Wells Fargo anticipates optimistic earnings forecast for Citigroup's stock, doubling in both its stock price and per-share earnings over the next three years.
Maintaining their Overweight rating, the team led by Mike Mayo revised their one-year target for Citigroup's stock price to $70, up from $60. They predict a significant rise to over $100 from its current level near $50 within a three-year timeframe.
Citigroup has emerged as Wells Fargo’s top pick among large-cap bank stocks heading into 2024. Despite a modest 0.3% rise in early trading to $51.60, Citigroup's stock has experienced a 14% gain over the past year, although it still trails the 24% increase seen in the S&P 500.
Contrary to the skepticism of some investors regarding Citigroup's manageability and investment potential, Wells Fargo analysts express confidence in the bank's prospects. This bullish stance is fueled by a comprehensive overhaul at Citigroup. The transformation involves streamlining management layers, withdrawing from several non-U.S. consumer markets, and restructuring into five distinct business divisions.
The Wells Fargo team anticipates Citigroup's earnings per share to surge from $5 to $10 in the next three years, driven by a mix of factors including heightened efficiency, strategic share buybacks, and workforce reductions.
The analysts argue that Citigroup's market valuation, which currently implies a recession, only reflects returns equivalent to half its 3-year target. They note that this assessment seems overly concentrated on one of Citigroup’s business lines ("Services"), representing just a quarter of the firm, while undervaluing the rest.
Key elements like the benefits from Citigroup's wholesale network and cost control initiatives are identified as significantly underappreciated factors in the bank's future success.
Opinions on Citigroup among analysts remain varied, with around 41% of those tracking the stock classifying it as a Buy, based on FactSet data.
