Strategy (MSTR) has recently experienced a significant selloff, reigniting longstanding debates about the sustainability of corporate Bitcoin balance sheets during steep market downturns. However, analysts from Matrixport have expressed optimism regarding the company’s stability and its potential inclusion in the S&P 500 by December.
The company’s stock plummeted from a peak of $474 to approximately $207 amid the latest market correction. Matrixport contends that the broader market might misinterpret this decline, attributing the pressure primarily to investors who acquired shares at elevated net asset value (NAV) levels rather than questioning Strategy’s capability to fulfill its debt obligations. They emphasize that shares now appear comparatively undervalued in the crypto sector, maintaining that the prospects for S&P 500 inclusion remain viable.
Matrixport’s analysis counters apprehensions regarding potential forced Bitcoin liquidations during downturns, labeling such risks as not immediate. Instead, they point to NAV compression as the primary challenge, where those who invested at inflated valuations face the most significant hardships as the premium on stock normalizes. Furthermore, insights from crypto intelligence firm 10X Research support the notion of Strategy having a 70% likelihood of being included in the S&P index by year’s end.
In a significant development, Strategy recently received its first credit rating from S&P Global Ratings, designated at “B-,” which falls within a speculative grade. This rating establishes a new standard for assessing corporate cryptocurrency treasuries and marks a milestone for Bitcoin treasury companies.
The ongoing selloff has exerted more pressure on smaller digital asset treasuries. Companies like BitMine, Metaplanet, Sharplink Gaming, Upexi, and DeFi Development Corp have witnessed their modified NAV (mNAV) ratios dip below 1, curtailing their capabilities to issue new shares and acquire further cryptocurrency. This broader trend of decreased mNAV values has persisted since June, with data from Standard Chartered revealing a widespread decline across the market.
In response to these challenges, Michael Saylor, Strategy’s executive chairman, reassured stakeholders about the company’s resilience. He told Fox Business that the firm is designed to endure substantial volatility, capable of withstanding Bitcoin drawdowns of 80% to 90%.
Additionally, Strategy has made a notable acquisition recently, purchasing 8,178 Bitcoin valued at $835 million, a substantial increase from its previous monthly buying rate of 400 to 500 BTC. This acquisition reflects the company’s commitment to its Bitcoin strategy amid current market conditions.
Despite the correction, Strategy has seemingly managed to maintain its integrity more effectively than the fluctuations might suggest. Its balance sheet remains robust, hopes for index inclusion persist, and its Bitcoin purchasing strategy has not faltered.
Looking ahead, whether Strategy’s stock can recover to previous highs largely hinges on Bitcoin’s future performance and investor confidence returning after a significant market reset.
Current sentiments from Wall Street remain optimistic regarding Strategy, with analysts issuing overwhelmingly positive ratings—12 buy recommendations against only 2 hold ratings over the past three months. The average price target among these analysts indicates a potential upside of 153%, suggesting a target price of approximately $524.08 within the next 12 months.
