Citigroup Pullback Offers Entry Point, A.G. Edwards Says

The brokerage says headline risk is overblown.
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A recent dip in the price of

Citigroup's

(C) - Get Report

shares makes it a good buy, according to brokerage A.G. Edwards, which upgraded the shares to buy from hold.

The shares were recently crossing on Island at $46.78, up 44 cents, or 1%. They were at a 52-week high of $49.15 on Oct. 16 and touched $48.98 as recently as Nov. 7. The 52-week low is $30.25.

"Citigroup has significant earnings leverage to the improving domestic economy, and its valuation has below-average vulnerability to rising rates," A.G. Edwards said. "Furthermore, its unrivaled product and geographic diversity limits the volatility of C's results and provides unique growth opportunities."

A.G. Edwards expects Citi to earn $3.39 per share this year, $3.80 next year and $4.25 in 2005, giving it a price/earnings ratio of 12.2 over 2004. "Citigroup is valued at nearly a full multiple discount to an amalgamated peer group of domestic and foreign large-cap banks and other diversified financials," the brokerage said.

"Concerns regarding the industrywide probe into mutual fund practices (which we believe to be overblown), coupled with a broad-based pullback in the market over the last week or so, have led the recent retreat in C shares," it said. "While we acknowledge that C is still vulnerable to a high degree of headline risk and volatility, we choose not to allow sensationalist commentary from the media to obscure our view of the underlying fundamentals of the company, which appear to be quite strong."