NEW BULLISH Plays
Citigroup Inc. - C - close: 54.17 change: +0.41
Stop Loss: 52.20
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on May -- at $---.--
Listed on May 04, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 19.2 million
New Positions: Yes, see below
Why We Like It:
When it comes to blue chips you don't get much bluer than Citigroup. This company is massive. The bank has almost $2 trillion in assets. Citigroup generated $45 billion in free cash flow in the last 12 months. That's about $15 per share in free cash flow.
Yet the banks have been underperformers in recent years. The Lehman Brothers bankruptcy that helped fueled the financial crisis was almost seven years ago. Shares of Citigroup are still down 90% from their 2007 levels.
Bulls can argue that shares of C are inexpensive. Current book value for the company is about $67 a share. Tangible book value is around $57 per share. Unfortunately the stock has been languishing in the $46-56 range for almost two years.
Just in case you're not familiar with Citigroup, here's a company description. According to their website, "Citi, the leading global bank, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.
Citi currently operates, for management reporting purposes, via two primary business segments: Citicorp, representing Citi's core growth franchises and Citi Holdings which contains businesses and assets that are not core to Citi's future. Citicorp includes the Global Consumer Banking (GCB) business and the Institutional Clients Group (ICG) and is focused on providing best-in-class products and services to customers and leveraging Citi's unparalleled global network, including many of the world's emerging economies."
The last couple of years have been considered transition years for the company. 2015 could be its breakout year. C just reported its Q1 2015 results on April 16th and it was their best quarterly profit in eight years. Their profit soared +21%. Wall Street was expecting earnings of $1.40 per share on revenues of $19.8 billion. Citigroup delivered $1.52 per share with revenues down -2.3% to $19.74 billion.
A lot of its improvement was thanks to a focus on cost cutting. They managed to reduce expenses by 10% from the prior year. At the same time the M&A market is improving. 2014 was a good year for mergers and acquisitions. 2015 is shaping up even stronger. C reported a +70% surge in M&A fees.
Citigroup's CEO Michael Corbat commented on his company's quarterly performance, "While some businesses faced revenue headwinds, we had a strong quarter overall, particularly in executing against our top strategic priorities. We grew loans and deposits in our core businesses and gained wallet share among our target clients. We tightly managed our expenses, helping to achieve positive operating leverage in Citicorp and we are on track to hit our financial targets for the year."
Technically the stock looks bullish as it builds on a positive trend of higher lows. Shares are in the process of breaking through resistance in the $54.00 area. Tonight we are suggesting a trigger to launch bullish positions at $54.65.
Trigger @ $54.65
- Suggested Positions -
Buy C stock @ $54.65
- (or for more adventurous traders, try this option) -
Buy the JUL $55 CALL (C150717C55) current ask $1.50
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike