3i Group PLC (LSE:III) shares fell as much as 8% on Thursday before paring losses to close 3% lower, after the market zeroed in on weaker-than-expected first-quarter sales at its key asset, Action. But Citi says investors may be overreacting.
The bank argues the figures were skewed by Easter falling earlier than last year and some one-off supply issues caused by an IT system upgrade - neither of which are expected to impact long-term performance.
Citi is more interested in Action’s growth potential. The discount retailer now sees room for 7% more stores than previously assumed, suggesting its future footprint could be nearly three times its current size.
It maintains a ‘buy’ rating on 3i, which remains one of its top three picks among diversified financials. The private equity group is also on its European focus list, with Action’s continued expansion seen as a key driver of future value.
Shares in the investment group recovered some of their poise on Friday, rising 1.4% to 3,742p.