Investment bank Citi has initiated coverage of Strategy with a rating of buy and high risk, setting a price target of $485 for the stock. This move positions the stock as a leveraged play on bitcoin, which is currently priced at approximately $113,046.67. Following Citi’s announcement, MSTR shares experienced a 1.5% increase in early trading on Tuesday, hovering around $301.
Citi’s price target is anchored in its 12-month forecast for bitcoin, estimating it will reach $181,000. This forecast implies a significant upside of 63% from current levels. The bank’s analysis indicates a net asset value (NAV) premium of 25% to 35%, which is consistent with Strategy’s historical bitcoin yield multiples ranging from 2.5x to 3.5x. According to Citi’s analysts, this structure allows for an amplified exposure to bitcoin’s fluctuations, delivering substantial gains during bullish market conditions but also posing a risk of steep losses when prices decline.
The investment bank outlined a bear case scenario in which bitcoin could drop by 25%, resulting in a shift of the NAV premium from 35% down to a 10% discount. Under such conditions, the stock could experience a decline of roughly 61%.
Citi attributes the company’s shift to a bitcoin-focused strategy to efforts spearheaded by Executive Chairman Michael Saylor in 2020, which has shaped its model for a digital asset treasury strategy. The report highlighted that Strategy is likely to continue issuing convertible debt, preferred equity, and stock based on the NAV premium as a means to enhance its bitcoin holdings.
Furthermore, the company’s bitcoin yield has been a significant contributor to the NAV premium. In a recent filing, Strategy disclosed it had acquired an additional 168 BTC at an average price of $112,051, raising its total holdings to 640,418 BTC. The strategic increase in bitcoin assets underscores the company’s commitment to expanding its digital currency portfolio amidst evolving market conditions.
