Citi's Travails May Yield a Bargain Buy

Citigroup has become the corporate face of America's subprime debacle.

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With massive write-downs triggering the departure of its chief executive, megabank Citigroup has become the corporate face of America's subprime debacle, with its stock falling nearly 50 percent last year to levels not seen since 2002.

But now, some contrarian Wall Street observers see a tasty value opportunity in the fallen financial giant. Punk Ziegel analyst Richard Bove argues that despite its recent troubles, Citigroup's geographic breadth—it operates in more than 100 countries—and extensive product offerings give the franchise tremendous earning power that is not reflected in the current stock price. "Buy it," Bove recently told clients.

Meanwhile, Jeff Harte of Sandler O'Neill says that although the company faces plenty of near-term uncertainty, investors with a longer-term outlook—say, 18 months or more—will be "very happy owning Citigroup at this price." The next 18 weeks, however, might not be so blissful if the economy slips into recession.