On Monday, BMO Capital Markets has increased its price target on shares of Citigroup Inc. (NYSE:C) to $63 from the previous $61 while maintaining a Market Perform rating on the stock. The adjustment follows Citigroup's first-quarter performance, which showcased a significant beat on credit and fees.
In the first quarter of 2024, Citigroup reported a stronger-than-anticipated outcome in credit and fees, yet this did not lead to any changes in the analyst's future estimates. The increased fees managed to balance out the higher provisions set aside for potential credit losses. Citigroup's guidance for the full year regarding revenue, costs, and credit remained unchanged, despite some skepticism from the market.
The financial institution made an effort to strengthen investor confidence in its medium-term return on tangible common equity (RoTCE) target of 11-12%, despite only achieving 7.6% in the first quarter of 2024. Citigroup detailed the RoTCE target by segment in an attempt to provide more clarity. The analyst from BMO projects an 8% RoTCE in 2025 and 10% in 2026.
The new price target of $63 is based on a valuation of 0.6 times the estimated tangible common equity (TCE) for the first quarter of 2026. This valuation is derived from an anticipated 8% RoTCE and an 8 times price-to-earnings (P/E) ratio. The updated target reflects a modest increase but continues to suggest a neutral perspective on the bank's stock performance.
InvestingPro Insights
As Citigroup Inc. navigates through its financial journey, recent data from InvestingPro highlights key metrics that investors may find valuable. The company's market capitalization stands at a robust $113.83 billion. Despite facing challenges with weak gross profit margins, as indicated by one of the InvestingPro Tips, Citigroup has shown resilience with a Price to Earnings (P/E) ratio of 17.47, which adjusts to a more favorable 13.66 when looking at the last twelve months as of Q4 2023. This suggests a potentially undervalued stock relative to its earnings.
Furthermore, Citigroup has demonstrated a commitment to shareholders through consistent dividend payments, maintaining them for 14 consecutive years, with a current dividend yield of 3.43%. This is coupled with a three-month price total return of 18.43%, underscoring strong recent performance. These financials are complemented by the InvestingPro Tips, which reveal that analysts predict the company will be profitable this year, an encouraging sign for potential investors.
For those seeking to delve deeper into Citigroup's financial health and future prospects, there are additional InvestingPro Tips available that can provide further guidance. To access these insights and leverage the full suite of analytical tools, investors can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. With this resource, investors can make more informed decisions backed by real-time data and expert analysis.
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