In response to the significant drop in the price of Strategy (MSTR), Brett Knoblauch from Cantor Fitzgerald has reduced his 12-month price target for Strategy (MSTR) to $229 from $560, highlighting a challenging environment for capital raising linked to bitcoin .
This new target implies nearly 30% upside from the current price of $180, with Knoblauch holding on to his overweight rating.
Strategy has centered its business approach on raising funds through common stock, preferred stock, and convertible debt offerings, subsequently using the capital to acquire more bitcoin. This strategy had been remarkably successful for years, leading to impressive returns since its inaugural bitcoin purchase in 2020. However, over the last year, investors have become increasingly reluctant to assign a high premium to Strategy relative to its bitcoin holdings. Coupled with bitcoin’s lackluster price performance, this has driven MSTR down approximately 70% from its peak late in 204.
Cantor has now assessed Strategy’s fully adjusted market net asset value (mNAV) at just 1.18x — still indicating a premium but lower than the significantly higher levels seen in the past. This restricts Michael Saylor and his team from raising funds through what could now be dilutive common stock sales.
Consequently, Knoblauch has drastically reduced his projection for Strategy’s annual capital market revenues to $7.8 billion from $22.5 billion. The valuation assigned to Strategy’s treasury operations — representing the potential upside it can secure by raising capital and acquiring bitcoin — has decreased from $364 per share to only $74.
Nevertheless, Knoblauch remains optimistic about the firm. “This is a result of both declining bitcoin prices and lower multiples,” he noted in his Friday report. Despite viewing the current market as a hindrance, his overweight rating indicates belief that the strategy could be effective again if bitcoin prices rebound and investor demand for leveraged exposure returns.
A similar sentiment was expressed in a different note from Mizuho, which adopted a more positive outlook on Strategy’s short-term financial health. After completing a $1.44 billion equity raise, the firm has amassed a cash reserve sufficient to cover 21 months’ worth of preferred stock dividends. Analysts Dan Dolev and Alexander Jenkins asserted that this affords Strategy the flexibility to maintain its position without the need to liquidate bitcoin.
During a recent event held by Mizuho, CFO Andrew Kang discussed a cautious approach to future fundraising. He stated that the firm has no intention of refinancing its convertible debt before the first maturity in 2028. Instead, it will focus on preferred equity, allowing access to capital while safeguarding its bitcoin assets.
Kang also emphasized that the company will only consider issuing new equity when its mNAV surpasses 1 — indicating that the market once again values its bitcoin exposure at a premium. If that doesn’t occur, and if raising capital becomes more difficult, bitcoin sales may be contemplated, but only as a last resort.
The company seems to be revisiting its strategy from 2022, when it halted bitcoin acquisitions during a market downturn and resumed once conditions improved. Analysts believe this approach — remaining patient and liquid — could aid Strategy in weathering the current downturn.
Read more: Strategy Still the Premier Bitcoin Proxy, Benchmark Says, Rejecting ‘Doom’ Narrative
