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Citigroup shares surge over 7% on Tuesday, Berkshire unveils new $3 billion investment in the stock

The shares of Citigroup Inc (C) surged more than 7% on Tuesday, as a fresh $3 billion investment by Warren Buffett’s Berkshire Hathaway Inc increased confidence in the Wall Street bank’s stock.

Berkshire Hathaway built its stake in Citi during the quarter ended on March 31st, as it took advantage of a 5% pullback in equities after US banks’ shares plunged on concerns over decelerating economic growth.

“Citi is one of the cheapest stocks in the market,” Thomas Hayes, Chairman at Great Hill Capital, was quoted as saying by Reuters.

“With Buffett ‘blessing’ it, it should finally get the interest it deserves and attract some buying interest in coming weeks and months.”

This new investment brought Berkshire’s stake in Citigroup to 2.8%, which made it the fourth-largest shareholder.

“The (Berkshire) investment seems like it gives validation to CEO Jane Fraser as an effective financial architect. However, it has no bearing on what’s needed most, and that is the building out and completion of the transformation plan,” Wells Fargo analyst Mike Mayo said.

Meanwhile, Berkshire Hathaway also discontinued a 33-year-old investment in Wells Fargo & Co.

Citigroup shares closed higher for the fourth time in the past ten trading sessions in New York on Tuesday. It has also been the sharpest single-session gain since November 9th 2020. The stock went up 7.56% ($3.59) to $51.05, after touching an intraday high at $51.61. The latter has been a price level not seen since May 6th ($52.00).

Shares of Citigroup Inc have retreated 15.47% so far in 2022 compared with a 14.21% loss for the benchmark index, S&P 500 (SPX).

In 2021, Citigroup Inc’s stock went down 2.06%, thus, it again underperformed the S&P 500, which registered a 26.89% gain.

Analyst stock price forecast and recommendation

According to TipRanks, at least 8 out of 17 surveyed investment analysts had rated Citigroup Inc’s stock as “Buy”, while other 8 – as “Hold”. The median price target on the stock stands at $65.41.

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