Citigroup Shares Trade Near 52-Week High: Time to Buy C Stock?

Citigroup, Inc. C stock is currently trading near its 52-week high of $72.80 (touched on Tuesday, Dec.3).C stock has gained 3.6% in the past month, outperforming its industry growth of 1.5% and the S&P 500 Index’s growth of 2.6%. Also, it has fared better than its industry peers like Bank of America BAC and JPMorgan JPM.Price PerformanceImage Source: Zacks Investment ResearchTechnical indicators also suggest strength for C. The stock is trading above its 50-day moving average.50-Day Moving AverageImage Source: Zacks Investment ResearchThis reflects bullish sentiments among investors, driven by robust upward momentum and price stability. Also, the company’s business-transforming initiatives focused on core operations are encouraging. So, is the Citigroup stock worth considering based on these factors? Let’s delve into the details to answer this.Citigroup’s Business Overhaul Plan to Aid FinancialsCitigroup’s CEO Jane Fraser is executing a sweeping overhaul of the bank to enhance its performance, reduce costs and simplify business operations.The transformation process included an organizational restructure that replaced the reportable segment with five new reportable operating segments. Also, the leaders of each of Citigroup’s five main businesses will report directly to the CEO. The reorganization trimmed management layers. It now has eight layers rather than 13. In sync with this, in January 2024, C announced the plan to eliminate 20,000 jobs as part of its broad-scale restructuring effort over the next two years.In line with this, according to a Financial Times report, Citigroup is planning to slash the number of year-end promotions it typically grants as it strives to keep expenses low amid a long-term organizational overhaul to shrink headcount.Such optimization of management layers and reduction in functional roles, along with the bank’s consumer banking divesture efforts, is likely to further drive $2-$2.5 billion of annualized run rate savings by 2026.C’s Focus on Core Operation to Stoke Fee Income GrowthApart from the major organizational overhaul, Citigroup has been emphasizing growth in core businesses by streamlining operations internationally. In sync with this, the company completed the separation of its institutional banking business in Mexico from its consumer, small, and middle market businesses earlier this week.Further, in June 2024, Citigroup sold its China-based onshore consumer wealth portfolio to HSBC China, a wholly owned subsidiary of HSBC Holdings plc. The bank winded down its U.K. retail banking business and expanded personal banking and wealth management businesses in the region.These exits are in addition to the major strategic action announced in April 2021 to exit the consumer banking business in 14 markets across Asia and the EMEA. Since then, the company has closed sales in Australia, Bahrain, India, Malaysia, the Philippines, Taiwan, Thailand, Vietnam, Indonesia and China. Such exits will free up capital and help the company pursue investments in wealth management operations in Singapore, Hong Kong, the UAE and London to stoke fee income growth.With these initiatives, the company projects revenues to register a compounded annual growth rate of 4-5% by 2026-end.Revenue CAGRImage Source: Citigroup Inc. Citigroup Set to Benefit From Fed Rate CutThe Federal Reserve’s aggressive start to monetary policy easing is likely to support Citigroup’s net interest income (NII) over the long term. The Fed has lowered the interest rates twice since September. Now, the fed fund rates stand in the 4.5-4.75% range. The Fed funds futures now indicate a roughly 74% chance of a 25-basis point rate cut at the FOMC meeting on Dec. 17-18, according to CMEGroup’s FedWatch Tool.The rate cut is a positive development for Citigroup, which is under increasing funding cost pressures. While higher rates led to a jump in Citigroup’s NII, it increased funding costs, which dented the net interest margin (NIM) over the past couple of years.During the nine months of 2024, NII declined 2% from the same period a year ago. NIM declined to 2.33% in the third quarter of 2024 from 2.41% in the second quarter of 2024 and 2.42% in the first quarter of 2024. For 2024, management expects NII (excluding Markets) to move down slightly on a year-over-year basis.With a decline in interest rates, funding costs will stabilize and will decline eventually. This will support Citigroup’s NII and NIM growth.Citigroup’s Efforts to Accelerate Digital StrategyThe company’s initiative to accelerate its digital strategy looks encouraging. In October 2024, Citigroup entered a multi-year agreement with Google Cloud, which is intended to support C's digital strategy through cloud technology and artificial intelligence (AI). This collaboration aims to modernize Citigroup's technological infrastructure and improve employee and client experiences via cloud-based apps.The same month, C launched a new integrated digital bill discounting solution, Citi Digital Bill (CDB), to modernize long-standing trade finance practices. By eliminating the need for physical documents, couriers and paper handling across various global parties, CDB significantly simplifies the process.At the end of the third quarter of 2024, C’s active digital users increase 5% on a year-over-year basis. The company’s efforts to accelerate digital growth will help it attract and retain customers and boost cross-selling opportunities.C’s Hurdles: Regulatory Issues & Rising Credit LossCitigroup has been facing heightened regulatory scrutiny lately. In August 2024, it made the headlines for breaching the Fed’s Regulation W, which limits intercompany transactions. Those breaches led to discrepancies in its internal liquidity reporting. This was reported by Reuters, citing an internal company document.This violation is not a single incident that reflects systemic inadequacies in Citigroup's regulatory compliance practices. Per a Bloomberg report, the company’s plan to expand in China met a snag with the U.S. regulators following these regulatory hurdles. The bank is awaiting a clearance letter from the Fed, which China authorities require to verify Citigroup's regulatory standing. Without this letter, the bank cannot proceed with its plans to set up a standalone securities firm in China.As Citigroup continues to struggle with fixing its regulatory problems, U.S. Senator Elizabeth Warren urged the Office of the Comptroller of the Currency to impose growth limitations on the company. This was first reported by Reuters.The company is witnessing a rise in credit losses. During the first nine months of 2024, Citigroup’s net credit losses increased 52% from a year ago. For 2024, management expects net credit losses in the band of 3.5-4% in the company’s branded cards business and 5.75-6.25% in retail services.Analyst Sentiments Mixed for COver the past 30 days, the Zacks Consensus Estimate for 2024 earnings has remained unchanged, while that for 2025 earnings has moved upward, reflecting that analysts are neutral about Citigroup’s near-term outlook, but optimistic about future growth prospects.Estimate Revision TrendImage Source: Zacks Investment ResearchFind the latest EPS estimates and surprises on Zacks Earnings Calendar.Citigroup Trades at a DiscountFrom a valuation standpoint, the company appears inexpensive relative to the industry. It is currently trading at a discount with a forward 12-month price-to-earnings (P/E) multiple of 10.10X, below the industry average of 14.53X.Price-to-EarningsImage Source: Zacks Investment ResearchCitigroup stock is also significantly cheaper than its peer BAC and JPM’s current forward 12-month P/E of 12.81X and 14.53X, respectively.Is This the Right Time to Buy C Stock?To summarize, despite the solid growth potential Citigroup offers over the long run and its favorable valuation, it is not advisable to add this stock to one’s portfolio right now, considering the ongoing legal scrutiny and rising credit losses, which might hamper its performance.Investors should closely monitor Citigroup's ability to navigate these challenges and capitalize on emerging opportunities to assess its long-term viability. We suggest investors wait for a more appropriate entry point. Those who already own the stock can hold on to it because it is less likely to disappoint over the long term.Citigroup carries a Zacks Rank #3 (Hold) now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Bank of America Corporation (BAC): Free Stock Analysis Report JPMorgan Chase & Co. (JPM): Free Stock Analysis Report Citigroup Inc. 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