Citi updated its ‘highest conviction’ stock list for Europe — naming 4 stocks to beat the market

Citi just refreshed its highest conviction stock ideas for Europe. The list comprises its analysts’ strongest buy and sell ideas for the next 12 months, according to Citi. It says its list of such ideas has delivered an absolute return of 10% over the last 12 months. Since January 2021, this list — which evolves as its analysts’ conviction levels for stocks change — has beaten the Stoxx 600 index by 2.5% on an annualized basis. Citi added new names in this latest update of the list, according to its note dated Dec. 12. Here are four of them. Capgemini Citi says the French IT services and consulting firm has an “improved positioning and growth profile.” Its portfolio mix makes it well positioned for higher growth, and it’s set for higher-than-expected margin expansion, the bank added. Capgemini also has attractive valuations, Citi said. The stock “remains attractive” relative to peers — both on earnings and its free cash flow. “We see consensus underestimating the potential for revenue growth acceleration and margin expansion,” said Citi. It gave the stock a price target of 235 euros ($257), or potential upside of nearly 23%. Continental German auto parts maker Continental has gone through a tech transition across its product lines, which has eaten into its margins. But Citi believes the firm should soon begin to reap the benefits, with the auto electronics space “transforming rapidly.” “We think the perception for Conti is starting to change from an undesirable equity story to potentially one of the best performing ideas within autos-sector into 2024,” said Citi analysts. It said the firm’s valuation “looks compelling,” trading at roughly a 30% discount to historical averages. Citi gave the stock a price target of 87 euros, or potential upside of about 14%. London Stock Exchange Citi says London Stock Exchange ‘s growth should accelerate from 2025. Catalysts include its partnership with Microsoft, which the bank said is set to drive a series of new products from the first half of 2024. The bank gave the stock a price target of £106, or 10600 pence​​ ($134). Stocks in the U.K. trade in pence. That represents potential upside of nearly 15%. Prosus Citi said Netherlands-based investment group Prosus is set to take a “more active approach” to portfolio management and a “disciplined approach” to capital allocation. It noted that the firm’s management has stated there would have to be a clear path to profitability. The bank added that Prosus is “one of the most exposed stocks to China in Europe … so it would be a beneficiary of improving sentiment to China.” Citi gave the stock a price target of 42.50 euros, or potential upside of 41%. — CNBC’s Michael Bloom contributed to this report.