The Citigroup stock price has dropped in the past three straight days as investors wait for the company’s quarterly results scheduled for Thursday this week. The stock dropped to $70 on Wednesday after JPMorgan became the first major bank to publish its results.
Citigroup has lagged its peers
Citigroup, the 210-year old bank, has struggled in the past few months. Year-to-date, the shares have risen by just 8%. In contrast, the SPDR Banking ETF (KBE) has jumped by more than 20%. Shares of companies like Morgan Stanley and Goldman Sachs have jumped by more than 30%.
Worse, the stock has fallen by 12% from its highest level this year. In contrast, the likes of JPMorgan and Morgan Stanley are hovering near their all-time high.
This underperformance is mostly because many investors view the bank as being highly complicated. Also, it is currently going through a transition with its new Chief Executive. As such, some investors are waiting to see whether some of her initiatives will work out.
In her short tenure, Jean Fraser has unveiled some of her plans. She intends to close many of the bank’s foreign branches and focus on the wealth management business that is dominated by the likes of UBS, Morgan Stanley, and Bank of America.
Citi earnings review
Investors will get a chance to assess this transition on Thursday when the company publishes its quarterly results. Analysts expect the data to show that the company’s revenue declined to $16.9 billion in the third quarter from $17.4 billion in the second quarter. This revenue will also be lower than the $17.3 billion that it made in the same quarter in 2020.
Analysts will be paying close attention to several data points in this report. First, like with all banks, they will focus on the company’s costs since most banks have signaled that costs rose in the third quarter. In the second quarter, the firm’s costs jumped by about 7%.
Second, the Citigroup stock price will react to the Institutional Clients Group (ICG), whose revenue crashed by 14% in the second quarter. Meanwhile, corporate lending revenue declined by 15% while its securities revenue jumped by about 9%.
Meanwhile, investors will be focusing on the Global Consumer Banking business, whose revenue dropped by 10%.
Is Citigroup a good investment?
Citigroup stock price has lagged that of its peer banks. It has also trailed the performance of the overall stock market since the S&P 500 index has jumped by more than 15% this year. The company’s valuation multiples are also cheaper than its peers. For example, it has a trailing PE ratio of about 7.25%, which is substantially lower than that of other banks like Wells Fargo, Bank of America, and Goldman Sachs.
Meanwhile, analysts believe that the stock will keep rising in the near term. For example, those at Jefferies expect that the shares will rise to 487, which is about $17 above the current level. Similarly, those at Morgan Stanley, Credit Suisse, Piper Sandler, and RBC expect that it will rise to above $80.
Citigroup stock price forecast
The daily chart shows that the Citigroup stock price has remained in a tight range recently. The stock remains between the key support and resistance levels at $63 and $79.55. The stock has moved below the 25-day and 50-day moving averages. It also seems like it has formed a double-top pattern that is shown in blue. Therefore, because of the double-top, the stock will likely break out lower in the near term. The bearish view will be validated when the stock drops below $67.
