Citi (C), the investment bank, has launched coverage on Strategy (MSTR) with a buy/high-risk designation and a price target of $485. This positions the stock as an leveraged investment in bitcoin .
MSTR shares rose 1.5% in early Tuesday trading, reaching approximately $301.
The price target represents Citi’s 12-month forecast for bitcoin at $181,000, indicating a 63% upside from current market values, along with a 25% to 35% net asset value (NAV) premium. This aligns with Strategy’s historical bitcoin yield multiple of 2.5x to 3.5x, as noted in the report released on Tuesday.
This setup, according to analysts at the bank, positions the stock as a magnified play on bitcoin’s movements, offering significant gains in bullish markets alongside considerable downturns if prices decline.
In Citi’s pessimistic scenario, if bitcoin were to decline by 25% and the NAV premium shifts from 35% to a 10% discount, the stock could see a loss of around 61%.
The bank attributes the company’s shift towards bitcoin in 2020, spearheaded by Executive Chairman Michael Saylor, as the framework for their digital asset treasury strategy.
According to the report, Strategy is anticipated to continue issuing convertible debt, preferred equity, and stock as necessary, depending on the NAV premium, to grow its bitcoin holdings.
The analysis highlighted that the company’s bitcoin yield, reflecting the year-to-date growth in BTC per fully diluted share, has been a vital factor driving the NAV premium.
Strategy announced that it had acquired an additional 168 BTC at an average cost of $112,051, increasing total holdings to 640,418 BTC, as per a filing made on Monday.
Read more: Strategy Expands Bitcoin Holdings to 640,418 BTC With Latest Purchase
