Key Takeaways:
- The 2-Minute Valuation Model values Citigroup stock at $105 per share in 2 years.
- That’s a potential 35% upside from today’s price of $78 per share.
- The bank stock is projected to grow EPS by over 69% over the next 3 years
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Citigroup (C) delivered a strong first quarter, reporting $4.1 billion in net income and a 9.1% return on tangible common equity (ROTCE), demonstrating continued momentum across all five business segments.
The bank’s transformation investments are modernizing infrastructure and improving efficiency, while its unique global footprint positions it as the go-to institution for multinational clients navigating an increasingly complex world.
With the bank stock now trading at around $78 per share, Citigroup presents a compelling opportunity for investors seeking exposure to a truly global bank that’s benefiting from trade volatility and geopolitical shifts while executing a successful transformation strategy.
Let’s examine why Citi looks attractive using our 2-Minute Valuation Model.
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What is the 2-Minute Valuation Model?
Three core factors drive a stock’s long-term value:
- Revenue Growth: How big the business becomes.
- Margins: How much the business earns in profit.
- Multiple: How much investors are willing to pay for a business’s earnings.
Our 2-Minute Valuation Model uses a simple formula to value stocks:
Expected Normalized EPS * Forward P/E ratio = Expected Share Price
Revenue growth and margins drive a company’s long-term normalized earnings-per-share (EPS), and investors can use a stock’s long-term average P/E multiple to get an idea of how the market values a company.
Why Citigroup Stock Looks Undervalued
Forecast
Based on analyst estimates, Citigroup is expected to achieve solid earnings-per-share growth over the next three years.
EPS is projected to grow from $6.21 in 2024 to $10.47 by 2027, representing a 69% increase in total.
This earnings growth for Citigroup stock is likely to be driven by:
- Global Trade Facilitation: Citi should benefit from a unique position as clients reconfigure supply chains and navigate tariff environments, with deep local presence in over 100 countries.
- Transformation Benefits: $53.4 billion expense target for 2025, down 5% year-over-year, with continued productivity gains from infrastructure investments.
- Services Growth: Treasury and Trade Solutions delivered the highest first-quarter revenue in a decade, with continued momentum in cross-border activity.
- Capital Return Acceleration: $1.75 billion in buybacks this quarter as part of a $20 billion program, with tangible book value crossing $90.
For our valuation, we estimate that the bank stock will reach $ 10 in EPS by 2027.
Check out Citigroup’s full analyst estimates (It’s free) >>>
Is Citigroup Stock Undervalued Right Now?
Citigroup stock trades at around 10x forward earnings, which is above its 10-year historical average P/E of 9.5x, as shown in the valuation chart.
Given the bank’s improved operational efficiency, diversified global revenue streams, and progress toward 10-11% return on tangible common equity (ROTCE) targets by 2026, a forward price-to-earnings (P/E) multiple of 10.0x appears reasonable for our conservative valuation.
Fair Value of Citigroup Stock
Using our 2-Minute Valuation Model and applying a conservative approach:
- Conservative 2027 EPS estimate: $10
- Conservative forward P/E multiple: 10x
- Expected dividends over the next 2 years: $5
Expected Normalized EPS ($10) * Forward P/E ratio (10x) + Expected Dividends ($5) = Expected Share Price ($105)
The 2-year expected Citigroup stock price we would get from this valuation is $105 per share.
With Citigroup stock currently trading at around $78 per share, this implies a potential upside of 35% over the next two years or a 16% annualized return.
Citigroup stock is well-positioned to deliver outsized gains to shareholders, given that the broader markets’ average annual returns have been around 10%.
Remember, this is just a valuation exercise, and we don’t know for sure what the stock’s price will be in the future.
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What is Citigroup Stock’s Average Analyst Price Target?
Analysts believe that Citigroup stock has limited upside, with an average price target of around $85 per share for the stock. This indicates that they see about 9% upside today for the bank stock based on its current share price:
Risks to Consider
Despite the bullish outlook, investors should be aware of several risks that could impact Citigroup’s growth trajectory:
- Geopolitical Exposure: Global operations create exposure to international conflicts, regulatory changes, and currency volatility.
- Execution Risk: Transformation initiatives require continued successful implementation across complex global operations.
- Economic Sensitivity: Credit quality could deteriorate if a global recession materializes, particularly in emerging markets.
- Regulatory Uncertainty: Ongoing regulatory requirements and potential changes could impact capital allocation and returns.
TIKR Takeaway
Citigroup presents a compelling investment opportunity for investors seeking exposure to the global banking and trade facilitation sectors.
The stock’s potential upside is driven by transformation execution, unique international franchise value, and positioning to benefit from global economic complexity.
While macroeconomic uncertainty persists, Citi’s diversified business model, strong capital position, and unmatched global presence provide solid foundations for long-term value creation.
The bank’s ability to serve as a “port in the storm” during uncertain times, combined with ongoing transformation benefits, could make it an attractive option for patient investors.
Management’s confidence in achieving a 10-11% ROTCE by 2026, supported by disciplined expense management and capital return acceleration, suggests that the transformation strategy is on track to deliver sustainable shareholder value.
Is Citigroup stock a buy over the next 24 months? Use TIKR to check the stock’s analyst price targets and growth forecasts to see if it is undervalued today.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
