Citigroup shares plunge on deteriorating risk sentiment

Citigroup shares plunge on deteriorating risk sentiment
Written by:
Stanko Iliev
28th October, 21:02
  • This stock could be a good long-term investment but maybe now is not the best time to invest in Citigroup
  • If the price falls below $40 it would be a strong "sell" signal and we have the open way to $35
  • Total revenue declined 6.8% Y/Y in Q3 while GAAP EPS was $1.40

Citigroup (NYSE: C) shares have weakened from $46 below $41 in less than three weeks and the current price stands around $41. When trading this stock, investors should have in mind that Citigroup is a stable bank with a good position on the market.

Fundamental analysis: Citigroup is a stable bank but the price could weaken even more in the upcoming weeks

Citigroup is an American multinational investment bank and financial services corporation headquartered in New York City. This is the third-largest banking institution in the United States with over 200 million customer accounts.

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Citigroup ended Q3 as the worst-performing financial stock for the last three months, down more than 15%. The main reason for this is the Covid-19 pandemic but once the situation has stabilized, the price of this stock will be at much higher levels.

This stock could be a good long-term investment but maybe now is not the best time for buying Citigroup shares because the price could weaken even more in the upcoming weeks. COVID-19 cases in the US continue to rise while Europe is not faring any better with this pandemic.

Citigroup has released Q3 earnings results, total revenue declined 6.8% Y/Y while Q3 GAAP EPS was $1.40. According to the latest news, Citigroup’s new equity chief began to cut jobs. He started with managing directors but this could move to lower-ranked workers.

Despite this, Citigroup is a stable bank with a good position on the market and this bank will weather the COVID-related storms. Citigroup increased its revenue in 2019 to $76.5B and with the market capitalization of $85B this stock is not overvalued.

Fund managers valued Citibank at a $113B market cap and at the current price of $41/share, it offers more than 25% upside potential. The attention of investors is also focused on the US stimulus aid package negotiations and the upcoming presidential elections.

Democrats and Republicans are using a coronavirus aid package as an election tool, both parts have reported “progress,” but continued to extend discussions. The US presidential elections will be on November 3 and according to the polls, US President Trump’s rival, Joe Biden, leads.

“Citigroup will certainly be prepared for the possibility of a contested presidential election that might disrupt the stock market”, said the bank’s CEO, Michael Corbat.

Technical analysis: $40 represents a very strong support level

Data source: tradingview.com

On this chart, I marked important resistance and support levels. The important support levels are $40 and $35, $45, $50 and $60 represent the resistance levels.

If the price jumps above $50 it would be a signal to buy this stock and we have the open way to $55. Rising above $60 supports the continuation of the bullish trend for Citigroup shares and the next price target could be located around $70.

On the other side, if the price falls below $40 it would be a strong “sell” signal and we have the open way to $35.

Summary

Citigroup expects to see continued pressure and consumer reflecting the impact of rates and lower levels of activity related to COVID-19. Citigroup shares are attractively valued currently and according to analysts, this bank is positioned to weather the COVID-related storms. My opinion is that this stock could be a good long-term investment but maybe now is not the best time to invest in Citigroup shares because the price could weaken even more in the upcoming weeks.

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