Catching up with the sharp decline in Strategy (MSTR) price, Cantor Fitzgerald’s Brett Knoblauch cut his 12-month price target for Strategy (MSTR) to $229 from $560, citing a weaker environment for raising bitcoin-linked capital. .
The new target still suggests a nearly 30% upside from the current price of $180, and Knoblauch maintains his Overweight rating.
Strategy has built its business model around raising money through common stock, preferred stock and convertible debt offerings, and using the cash to buy more bitcoin. The flywheel has worked wonders for years, propelling MSTR to astonishing returns since its first bitcoin purchase in 2020. Over the past year, however, investors have been less willing to value Strategy at a high premium over its bitcoin stack. Combined with bitcoin’s poor price performance, that caused MSTR to drop roughly 70% from its peak in late 204.
Cantor now estimates Strategy’s fully adjusted mNAV at just 1.18x, still a premium but below much higher levels in the past. This prevents Michael Saylor and his team from raising money through what would now be potentially dilutive sales of common stock.
Knoblauch thus cut his annual capital market revenue forecast from Strategy from $22.5 billion to $7.8 billion. The value assigned to Strategy’s treasury operations (essentially how much growth potential it can capture by raising capital and purchasing bitcoin) fell from $364 per share to just $74.
Still, Knoblauch has not abandoned the company. “This is a function of both falling bitcoin prices and lower multiples,” he wrote in his Friday note. While he views the current market as a headwind, his overweight rating indicates confidence that the strategy could work again if bitcoin prices recover and investor appetite for leveraged exposure returns.
That view was echoed in a separate note from Mizuho, which took a more optimistic stance on Strategy’s near-term financial position. Following a $1.44 billion capital raise, the company has built a cash reserve large enough to cover 21 months of preferred stock dividends. Analysts Dan Dolev and Alexander Jenkins said this gives Strategy the flexibility to maintain its position without needing to sell bitcoin.
At a recent event hosted by Mizuho, CFO Andrew Kang outlined a cautious approach to future fundraising. He said the company has no plans to refinance its convertible debt before the first maturity in 2028. Instead, it will rely on preferred stock, which gives it access to capital while preserving its bitcoin holdings.
Kang also made it clear that the company will only reissue new shares when its mNAV rises above 1, a sign that the market is once again pricing its bitcoin exposure at a premium. If that doesn’t happen, and it becomes more difficult to raise capital, bitcoin sales could be considered, although only as a last resort.
The company appears to be taking a page from its playbook for 2022, when it paused bitcoin purchases during a market downturn and resumed purchases once conditions improved. Analysts say this strategy (staying patient and liquid) could help Strategy overcome the current crisis.
Read more: Strategy remains Bitcoin’s main proxy, says Benchmark, rejecting ‘Doom’ narrative
