In a significant development, Cantor Fitzgerald has revised its price target for Strategy’s shares, lowering it from a previous estimate of $560 to $229, marking a substantial reduction of approximately 59%. Despite this downward adjustment, the investment bank has maintained an “Overweight” rating for the Bitcoin-focused firm, which currently holds around $58 billion in Bitcoin (BTC).
The revision reflects a broader decline in analysts’ valuation of Strategy’s treasury operations, which saw its per share estimate decline to $74 from a previous high of $364. Over the next year, Cantor Fitzgerald anticipates that Strategy will raise $7.8 billion from the capital markets, a notable decrease from the earlier projection of $22.5 billion.
Amid this backdrop, the analysts noted that some market participants are concerned about a prolonged downturn in the cryptocurrency market, often referred to as the “crypto winter.” Nevertheless, they view much of the fear surrounding Strategy as overblown. On Friday, Strategy’s share price fell to $178, undoing earlier gains for the week, while Bitcoin’s price also dipped below $90,000. Bitcoin has experienced a nearly 30% decline since hitting a record high of over $126,000 earlier in October.
Cantor Fitzgerald’s analysts remain optimistic, expressing confidence that Strategy is unlikely to be compelled to sell its Bitcoin holdings, despite increasing reliance on issuing preferred shares to finance its Bitcoin acquisitions. These preferred shares come with dividend payments, but they lack guaranteed returns. Recently, Strategy established a $1.44 billion cash reserve designed to cover its dividend payments for the next two years. Notably, the firm’s convertible debt, totaling $8.2 billion, does not mature until 2028.
The analysts also conveyed that Strategy’s Bitcoin purchasing activity is not expected to halt just because of recent price drops. However, they acknowledged that the company had signaled the potential for selling its Bitcoin under specific conditions.
One concern that they deemed “somewhat warranted” is the possibility of Strategy’s removal from MSCI’s indices, as previous observations by JPMorgan suggested that such a development could trigger outflows amounting to $2.8 billion.
Historically, Strategy has augmented its Bitcoin holdings through the issuance of common stock. However, with its market capitalization now falling below the value of its cryptocurrency assets, this approach has become less viable for increasing Bitcoin ownership per share. The analysts noted that this situation reflects a cyclical trend evident during both the lows of 2022 and the subsequent highs of the previous year.
In the current market environment, several institutional firms have updated their price targets for Strategy’s stock, while shares hover near a 13-month low. While TD Cowen adopted a more bearish outlook, Benchmark opted to remain bullish.
