Wolfe Research upgraded shares of Citigroup (C) to Outperform from Peer Perform in a note Wednesday, establishing a price target of $58 per share.
Analysts said the upgrade is part of their firm's 2024 outlook after being on the sidelines with the stock since April 2021.
The firm previously had various concerns, including aggressive revenue targets, higher expense inflation, and a heavier capital burden under Basel 3 Endgame (B3E).
"While we still believe management's revenue targets are much too aggressive, this has little bearing on our investment case, with valuation upside largely predicated on 'self-help" levers,' wrote the analysts.
"Shares have lagged since our downgrade (~3800bps U/P vs. Money Centers / S&P Fins.) and given a number of emerging tailwinds (regulatory roll-back, meaningful cost savings from headcount actions), we see risk-reward as more compelling," they added.
Wolfe Research now sees a credible path to between 8% and 9% return on total capital by 2025/2026, which they feel justifies future value closer to 70% of the bank's target book value or a low-$60 per-share valuation, implying a potential 20% to 25% upside.
The Wolfe Research upgrade follows Wells Fargo's recent bullish note on Citi, in which it said it sees the stock doubling to $100 per share or more over the next three years.