TD Cowen has significantly reduced its price target for shares of Strategy (MSTR) by 35%, adjusting its expectations in light of ongoing struggles in the Bitcoin market. Analysts, led by Lance Vitanza, have decreased the price target from $400 to $260, citing Bitcoin’s current “observed ongoing weakness.” The investment firm has also revised its predictions for Bitcoin’s performance, now expecting it to reach $100,000 by the end of the year, down from a previous forecast of $140,000.
As of Tuesday, the leading cryptocurrency dropped below the $60,000 mark, trading at around $58,400. This represents a more than 20% decline over the past month and a staggering 53% drop from its all-time high of over $126,000 recorded last October. The shares of Strategy saw an 8.6% decrease, landing at $84.75 after recovering from a nine-day losing streak the day before. Since the firm sold Bitcoin for the first time in 2022 roughly a month ago, its stock has plummeted nearly 41% from a previous price of $142.69.
The analysts noted that the price adjustments came independently of a new capital management framework introduced by Strategy earlier this week. They characterized the firm’s Digital Credit Capital Framework as a positive development for credit visibility and capital flexibility, as it outlines a strategy for managing cash reserves, preferred stock, and a significant holding of 847,363 Bitcoins.
In conjunction with the framework launch, Strategy announced a substantial increase in its cash reserves to $2.55 billion. Recent analyses have brought attention to rising costs related to STRC, the company’s preferred stock. The analysts opined that this tactical shift could help restore confidence in Strategy’s resilience during challenging Bitcoin market conditions, amid concerns regarding the sustainability of dividends on products like STRC.
Notably, on Monday, the dividend rate for STRC was increased for the eighth time to 12%, raising the firm’s recurring costs. The preferred stock fell 0.7% to $83.11 on Tuesday, remaining below its $100 par value after experiencing a record low of $71.25 the previous week.
By explicitly connecting dividend adjustments for STRC to the management of cash reserves and future Bitcoin sales, the firm has taken what the analysts described as “a modestly positive step,” aimed at enhancing price stability and bolstering investor confidence in the preferred stock. Additionally, the new framework signals a shift toward “two-way capital allocation,” as Strategy can potentially repurchase up to $1 billion in both common and preferred shares, which may yield arbitrage opportunities.
The analysts also noted a newly formalized monetization program for Bitcoin that allows the firm to liquidate up to $1.25 billion in Bitcoin to bolster cash reserves. This initiative aligns the digital asset as a flexible source of capital alongside other financial levers. Earlier this month, Strategy’s stock saw a decline following its sale of 32 Bitcoin for $2.5 million—a move intended to signal commitment to preferred stockholders, yet it heightened uncertainty regarding future Bitcoin sales.
Market predictions on Myriad, a prediction platform owned by Decrypt’s parent company Dastan, indicated a reduced likelihood—14%—that Strategy would maintain more than 1 million Bitcoin by year’s end, a drop from 17.5% a week prior. This is a stark contrast to the period last July when TD Cowen had raised its price target for Strategy to $680, aligning with share prices above $450. Currently, MSTR shares have tumbled more than 79% over the past year.
