The Citi Comeback?

The Citi Won't Be Sleeping Forever

It's no surprise that Citigroup (C) (C) is in the doghouse with most investors. The credit crunch and subprime meltdown sank its stock to 18 in mid-March, down from 55 in May, 2007. A number of influential analysts put a "sell" on Citi, including Meredith Whitney of Oppenheimer (OPY), William Tanona of Goldman Sachs (GS), and Michael Mayo of Deutsche Bank's (DB). But quite a few equally important Street pros recommend a buy: JPMorgan Chase (JPM) Vivek Juneja, Punk Ziegel's Richard Bove, and Lehman Brothers' (LEH) Jason Goldberg. And Tom Sowanick, chief investment officer of Clearbrook Financial, which owns shares, says Citi, now up to 23.57, "should hit 45 in 12 to 24 months." True, even the bulls see more losses and writedowns ahead. "However, now is the time to snap up the depressed shares for the long term," says Sowanick. To pave the behemoth's way toward profit growth, he says, Citigroup CEO Vikram Pandit "has a free pass to focus on risk management and slash costs and clean up the balance sheet." (The bank is expected to sell $12 billion of leveraged loans and bonds to private equity groups.) JPMorgan's Juneja argues that although Citi is still under pressure for the near term and management's credibility "remains cloudy," it's attractive on its valuation and "much better footprint for long-term growth." He sees Citi (a client) earning $1.69 a share in 2008 and $3.50 in 2009, up from 71 cents in 2007.
Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
—By Gene Marcial