How to Approach Citigroup Stock as It Soars 55.1% in a Year?

Core Insights - Citigroup, Inc. (C) shares have increased by 55.1% over the past year, outperforming the industry growth of 33.2% and its peers, Wells Fargo (WFC) and Bank of America (BAC), which rose by 21% and 20.6% respectively [1] Company Strategy and Performance - Citigroup is advancing its multi-year strategy to streamline operations and focus on core businesses, having exited consumer banking in nine out of fourteen targeted markets in Asia and EMEA [5][6] - The company is progressing with the divestiture of Banamex, with a 25% stake sold to Fernando Chico Pardo, and is also winding down its Korean consumer banking operations and exiting Russia [6] - CEO Jane Fraser noted that the transformation strategy has improved business performance, with wealth management and investment banking revenues rising by 17% year over year in the first nine months of 2025 [7] Cost Reduction Initiatives - Citigroup aims to achieve annual savings of $2-2.5 billion by 2026 through job cuts, AI adoption, and streamlining efforts, with plans to cut 20,000 jobs or 8% of its global staff [8][11] - The company is focusing on reducing expenses, with projected expenses for 2026 expected to be below $53 billion, down from $56.4 billion in 2023 [13] Revenue and Income Growth - Citigroup's net interest income (NII) has improved, rising by 9% year over year in the first nine months of 2025, with expectations for NII growth to increase by 5.5% for 2025 [14][17] - The company anticipates total revenues to exceed $84 billion in 2025, with a projected revenue growth rate of 4-5% CAGR through 2026 [9] Private Lending Expansion - Citigroup is expanding its private lending business through partnerships, including an $80 billion portfolio offering with BlackRock and a $25 billion private credit program with Apollo Global Management [19][20] Financial Position and Capital Distribution - As of September 30, 2025, Citigroup's cash and investments totaled $474.3 billion, with total debt at $370.6 billion, indicating a strong liquidity position [21] - The company has increased its dividend by 7.1% to 60 cents per share and has a $20 billion common stock repurchase program, with $11.3 billion remaining as of September 30, 2025 [22][23] Investment Outlook - Citigroup is positioned for sustainable long-term growth, with solid revenue momentum, disciplined cost control, and expanding partnerships in private lending [24] - The Zacks Consensus Estimate for Citigroup's earnings implies year-over-year growth of 27.4% for 2025 and 30.1% for 2026, with sales expected to increase by 6.1% and 3.2% respectively [25] Valuation - Citigroup is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 10.72X, below the industry average of 15.07X, indicating it may be undervalued relative to peers [30]