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Is Citigroup Inc. worth investing in Q2 2024?

Updated: May 8


Author: Emilia Cwiklinska

Publication date: 17.04.2024


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Citigroup Inc. or Citi is an American multinational financial services corporation and investment bank registered in Delaware and based in New York City. The company stands as an iconic figure in the American financial landscape. Yet, recent years have posed significant challenges for the banking giant.

As of April 2024, Citigroup holds a market capitalisation of $111.69 Billion, positioning it as the 129th most valuable company globally based on market cap according to CompaniesMarketCap. Despite its stature, Citigroup has been struggling with a high-cost structure and a lack of clear strategic direction.



Financial Performance and Position


A closer look at Citigroup's financial metrics reveals a mixed bag based on SEC disclosures. The company's profitability metrics include a profit margin of 15.98% and an operating margin of 23.3%. Moreover, return on tangible assets and return on capital employed are projected to decline, reflecting potential challenges in asset utilization and capital efficiency.


Struggles and Turnaround Efforts


Citigroup's struggles over the past 15 years have been multifaceted. The aftermath of the 2008 financial crisis saw the bank grappling with the consequences of its high-growth, high-risk strategy. However, under the leadership of CEO Jane Fraser, Citigroup has embarked on a journey to enhance profitability and streamline operations. Cost-cutting measures, including layoffs and exiting marginal business lines, signal a concerted effort to address the company's high-cost structure.


Analyst Insights and Market Sentiment


Analyst Mike Mayo presents an intriguing perspective on Citigroup's potential turnaround. Mayo's bullish thesis revolves around the simplification of Citigroup's business, coupled with aggressive cost-cutting initiatives and stock buybacks. While Citigroup's recent stock price of $57,64 with a dividend yield of 3.59% may raise eyebrows, there remains optimism among investors regarding the bank's future prospects. However, cautious optimism is advised, considering Citigroup's history of underperformance and the inherent uncertainties in the financial sector.


Forecast


While the U.S. economy is anticipated to decelerate in the beginning of 2024, Citi Global Wealth predicts that market attention will shift towards accelerated growth in the latter half of 2024 and extending into 2025. This upsurge is expected to manifest in corporate earnings, projecting an increase of 4% in 2024 and 8% in 2025, consequently strengthening the overall stock market.


Investment Considerations


For prospective investors, the decision to invest in Citigroup hinges on a careful evaluation of risk and reward. While recent cost-cutting measures and analyst endorsements suggest a potential upside, concerns regarding profitability and market volatility warrant a prudent approach. Timing and entry price are crucial factors to consider, with a focus on securing a margin of safety to reduce downside risks.


Conclusion


As Citigroup navigates through a period of transformation, investors are left to consider its investment potential in Q2 2024. While signs of improvement and analyst endorsements offer glimmers of hope, inherent risks emphasize the need for a cautious and discerning approach. Citigroup's journey towards recovery is fraught with challenges, yet for those willing to weather the storm, opportunities may emerge. As such, the question of whether Citigroup Inc. is worth investing in Q2 2024 remains open, awaiting careful consideration and strategic insight from prospective investors.




 

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