Citigroup: Financial Winner
The broad indexes ended mixed, despite positive economic news, as shares of Apple (AAPL) dropped over 12% to close at $450.50, after the company on Wednesday after the market close reported fiscal first-quarter earnings of $13.81 a share, which was ahead of the consensus estimate of $13.47, while fiscal first-quarter revenue totaled $54.5 billion, rising from $46.33 billion a year earlier, but missing the consensus estimate of $54.73 billion, among analysts polled by Thomson Reuters.
Oppenheimer analyst Ittai Kidron reiterated his "outperform" rating for Apple, but lowered his 12 to 18 month price target for the shares to $600 from $800, saying the company "delivered in-line results and like last quarter provided disappointing guidance," and that "the high-end smartphone/tablet
"This is pushing Apple's growth and mix downward to international markets/mid-tier and pressuring margins," Kidron said, adding that "We'd buy the shares after the dust settles as we still see room for top-line/EPS growth, but multiples will likely be permanently hurt as Apple starts to look more like a typical high-performing consumer-tech company."
Turning to financials, the KBW Bank Index (I:BKX) was up slightly to close at 53.95, with all but five of the 24 index components rising for the session, following two pieces of good economic news.
The Department of Labor announced that initial unemployment claims fell by 5,000 during the week ended Jan. 19 to 330,000, from the previous week's unrevised figure of 335,000. Economists were expecting an increase to 355,000, according to Briefing.com. The four-week moving average was 351,750, a decrease of 8,250 from the previous week's average of 360,000.
Continuing jobless claims for the week ended Jan. 12 fell by 71,000 to 3.157 million, down from the prior week's upwardly revised level of 3.228 million.
Also on Thursday, the Conference Board's leading economic index for the U.S. showed a rise of 0.5% in December to 93.9, following an upwardly revised flat read for November, and a 0.3% increase in October. A rebound of 0.3% was expected for December.
Citigroup's shares have now returned 8% year-to-date, following a 51% return during 2012, when the stock partially recovered from a 44% decline during 2011.
The shares trade for 0.8 times their reported Dec. 31 tangible book value of $51.19, and for 9.3 times the consensus 2013 EPS estimate of $4.60. The consensus 2014 EPS estimate is $5.19.
Citigroup's drastic fourth-quarter actions to reduce expenses through the reduction of 11,000 staff positions and the closing of 84 branches, underline Oppenheimer analyst Chris Kotowski's comments late on Wednesday that with credit stabilizing, large banks can now " focus on optimizing returns ."