Citigroup stock price is dirt cheap: Is it a buy during the turnaround?

Citigroup (NYSE: C) stock price has underperformed its peers in the past decade. It has risen by more than 80% since 2009 while the SPDR S&P Bank ETF (KBE) and SPDR S&P Regional Banking ETF (KRE) have risen by more than 230% and 160%, respectively. It has also underperformed during Jane Fraser’s tenure.

Citigroup turnaround strategy

Citigroup, the third-biggest bank in the United States, has taken actions to boost its shares in the past decade. It has repurchased over a third of its shares, paid billions of dollars in dividends, boosting its annual payout from $0.04 to $2.12. 

Despite these measures, investors seem unimpressed by the company as it has underperformed its peer group. Therefore, it makes sense that the company is now working on a major overhaul.

Citigroup’s turnaround has numerous aspects. It has announced major layoffs, which could be in the thousands. It is also reorganizing its business into five core businesses and simplify its operations.

The five core businesses will be services, markets, banking, consumer banking, and wealth management. Services is a crucial business that will include its treasury and custody work for big clients. Banking will have investment banking, corporate, and commercial banking. 

Is Citigroup a good investment?

Some analysts believe that Citigroup’s turnaround will have a positive impact on the company. In a note, Mike Mayo, the respected Wells Fargo analyst, believes that the Citigroup stock will rise to $55 from the current $40.

Further, Citigroup has been a highly profitable bank over the years. Its revenue in the last twelve months (TTM) came in at $70.5 billion while its net income was $13.51 billion. Its revenue and profit in Q2 was $17.6 billion and $2.92 billion.

Meanwhile, Citigroup is significantly undervalued compared to its peers. It has a PE ratio of 7.47, the lowest of key banks like UBS, Bank of America, JP Morgan, and Wells Fargo. Its price-to-book of 0.44 is also lower than its peers. Most importantly, Citigroup’s discount t obook has a 55.92%, the lowest vs peers. 

Therefore, from a valuation standpoint, it seems like Citigroup is a good investment. Besides, it still has a forward dividend yield of 5.18%. 

However, as I warned in my articles on Lloyds Bank, I don’t recommend buying companies with a long history of underperformance. As such, I urge caution when investing in Citi shares.

Citigroup stock price analysis

The daily chart shows that Citigroup share price has been in a strong bearish trend for a while. Most recently, it has remained below the green descending trendline. This line connects the highest swings since March 2022. The shares have dropped below the 50-day and 100-day moving averages.

Citigroup stock price is now attempting to move below the crucial support level at $41.18, the lowest level since December last year. Therefore, the path of the least resistance for the stock is downward, with the next key level to watch being $38.47, the lowest level in October 2022.