TLDR
- MicroStrategy (MSTR) stock rose 6.16% despite being downgraded to Sell by Monness analyst Gus Gala
- TD Cowen maintained a Buy rating with a $550 price target on MSTR’s $722.5 million fixed income offer
- The company, now doing business as Strategy Inc., holds 528,185 Bitcoins worth about $44 billion
- Analysts disagree on MSTR’s ability to continue its Bitcoin acquisition strategy through financing
- President Trump plans to make cryptocurrency a national priority, potentially benefiting Bitcoin-holding companies
Strategy Inc., formerly known as MicroStrategy, saw its stock rise 6.16% to $306.02 on Tuesday despite receiving a downgrade from one analyst. The company, which holds the largest corporate Bitcoin treasury, continues to attract investor attention as opinions differ on its future prospects.
The stock’s rise came despite Monness, Crespi, Hardt & Co. analyst Gus Gala downgrading MSTR to Sell from Neutral with a price target of $220. This represents a significant discount from current trading levels.
Gala’s price target assumes a 25% premium to the value of the 554,000 Bitcoin he expects Strategy to hold by year-end. This would value the company’s Bitcoin holdings at approximately $58 billion based on recent prices.
Bitcoin Holdings and Acquisition Strategy
Strategy Inc. held 471,000 Bitcoins at the end of 2024. The company has continued its acquisition strategy, with its latest purchase bringing total holdings to 528,185 Bitcoins as of March 30.
Including debt, Strategy is currently valued at about $90 billion, with its Bitcoin holdings worth approximately $44 billion. The cryptocurrency traded at around $83,665 on Tuesday, according to CoinDesk data.
The company has used various financing methods to fund its Bitcoin purchases. These include issuing stock, preferred stock, and bonds.
Gala expressed concerns about Strategy’s ability to continue raising money for Bitcoin purchases. He noted that “the convertible issuance strategy is likely tapped” and financing is becoming more expensive.
The analyst also pointed out that market absorption of the company’s preferred stock has been lower than expected. This “highlights limits” to the company’s Bitcoin treasury goals.
Competing Analyst Perspectives
Not all analysts share this bearish outlook. TD Cowen reaffirmed its Buy rating for Strategy with a price target of $550, more than double Gala’s target.
TD Cowen’s bullish stance is based on Strategy’s recent $722.5 million fixed income offer. The analyst believes this move could strengthen the company’s ability to acquire more Bitcoins.
According to TD Cowen, the issuance of non-convertible preferred shares represents a strategic decision. This will allow the company to advance its Bitcoin acquisition strategy.
The firm expects Strategy to finance dividends on the new shares primarily through the issuance of common equity under its ATM (at-the-market) program. This program could be extended or supplemented in the future.
Political Support for Cryptocurrency
Strategy may also benefit from favorable political developments. President Donald Trump has stated he plans to make the cryptocurrency industry a national priority.
This potential government backing could provide a boost to Bitcoin mining giants and major holders like Strategy. The company was specifically mentioned as potentially benefiting from this policy direction.
The stock’s performance came on a mixed day for the broader market. While the Dow Jones Industrial Average dipped marginally by 0.03%, the tech-heavy Nasdaq gained 0.87% and the S&P 500 rose 0.38%.
Strategy was among the top performers on Tuesday, making a list of companies that outperformed the broader market. The stock met criteria including a market capitalization above $2 billion and trading volume exceeding $5 million.
Originally founded as an enterprise software company in 1989, Strategy is now commonly viewed as a leveraged play on Bitcoin. The company’s transformation from software provider to Bitcoin treasury has made it a unique investment vehicle.
Investors appear to be weighing the competing analyst views, with the stock’s rise suggesting that bullish sentiment currently has the upper hand.
The company’s future performance will likely depend on Bitcoin price movements and its ability to continue financing additional cryptocurrency purchases.
With opinions divided among analysts, investors should carefully consider both the opportunities and risks associated with Strategy’s Bitcoin-focused business model.
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