Dick Bove, analyst at Rochdale Securities, continues to push his price target up for Citigroup (NYSE:C), raising it to a huge $8.50 a share, an increase of $1.50 a share from his last targeted price of $7.00 a share.
Part of his increasing optimism is the announcement that the U.S. Treasury Department is committing to selling its shares in the company, and divesting of them shouldn’t have a detrimental effect on Citigroup in Bove’s view, as the number of shares trading on a daily basis will help them from being diluted too much.
“I think the mathematics work out that [the government] probably can get rid of the stock without shaking the market too much. For example, our traders are saying that Citi trades about 800 million shares a day, which means if you get rid of 8% to 10% a day its 80 million shares, which means in a 100 trading days you can get rid of it which means … by September or October they should be out of the position, said Bove.
The other side of it is many investors consider the continual holding of a stake in Citigroup by the government is in reality a drain on the share price of the bank, and once the government begins to divest of the shares it’s highly likely it will soar even higher at that time.
For the fundamentals of the company, Bove says after the period of restructuring of the company he sees Citigroup able to generate profits of 70 cents a share.
He has upgraded the financial institution to a buy.
