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Saturday, July 14, 2012

BAC & Citigroup Stock outlook july 16-20 2012

BAC & Citigroup Stock outlook july 16-20 2012 : Bank of America Corporation (BAC) & Citigroup, Inc. (C) : The money center bank stocks are up significantly on the heels of two great earnings reports JPMorgan (JPM) and Wells Fargo (WFC). These were buy the news events as the doom and gloomers have recently taken control of market sentiment sending it to the bottom of the barrel.

The fact of the matter is U.S. banks are in great shape. How soon we forget last quarter's earnings reports from the banks were positive. The U.S. bank have been through the Fed's stress tests, downgraded by Moody's and had their earnings expectations lowered significantly. I see both Citigroup and BAC beating expectations and moving higher. Please review the following fundamental and technical analysis of the two stocks.

BAC is trading well below its consensus estimates and its 52 week high. The company is trading 24% below its 52 week high and has 33% upside based on the analysts' consensus mean target price of $10.36 for the company. BAC was trading Friday for $7.79, up over 4% for the day.

Fundamentally, BAC has several positives. The company has a forward PE of 7.63. BAC is trading for 1.69 times free cash flow and approximately one third of book value. EPS next year is expected to rise by 75%. Insider ownership is up 93% over the past six months.

BAC is in a solid uptrend posting higher highs and higher lows since mid-May. The stock has been under accumulation as is poised to break out to the upside based on a positive earnings report. The U.S. housing market is on its way to recovery and should underpin BAC's results. I like the stock here.

Citigroup is trading well below its consensus estimates and its 52 week high. The company is trading 34% below its 52 week high and has 52% upside based on the analysts' consensus mean target price of $40.39 for the company. Citigroup was trading Friday for $26.66, up over 5% for the day.

Fundamentally, Citigroup has several positives. The company has a forward P/E of 5.54. Citigroup is trading for 1.54 times free cash flow and less than half of book value. EPS next year is expected to rise by 14.86%. Insider ownership is up 30% over the past six months and the company pays a dividend with a yield of .16% and has a PEG ratio of 0.82.

Citigroup's stock is flat on the year. The stock recently bounced off the $25 level for the third time in the last 12 months effectively putting in a triple bottom. The 200 day sma is leveling off at the $30 mark. I see the bank up significantly within a year's time. I expect Citigroup to break above $30 in short order and hit $50 within the next 18 months. I'm a buyer here.

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