Investment bank Citi (C) initiated coverage of the Strategy (MSTR) with a buy/high risk rating and a price target of $485, positioning the stock as a leveraged bet on bitcoin. .
MSTR shares rose 1.5% in early trading Tuesday, around $301.
The price target reflects Citi’s 12-month bitcoin forecast of $181,000, representing a 63% upside from current levels, and a net asset value (NAV) premium of 25% to 35%, which aligns with Strategy’s historical bitcoin return multiple of 2.5x to 3.5x, the bank said in Tuesday’s report.
That structure, the bank’s analysts argued, makes the stock an amplified play on bitcoin performance, with huge upside in bull markets and sharp declines if prices reverse.
Under Citi’s bearish scenario, with bitcoin falling 25% and the NAV premium swinging from 35% to a 10% discount, the stock could lose around 61%.
The bank credits the company’s pivot to bitcoin in 2020, led by CEO Michael Saylor, as a model for the digital asset treasury strategy.
Strategy is expected to continue issuing convertible debt, preferred stock and equity, depending on the NAV premium, to expand its bitcoin position, according to the report.
The report noted that the company’s bitcoin performance, the increase in BTC per fully diluted share so far this year, has been a key driver of the NAV premium.
Strategy said it had purchased another 168 BTC at an average price of $112,051, bringing total holdings to 640,418 BTC, in a filing on Monday.
Read more: Strategy Expands Bitcoin Holdings to 640,418 BTC with Latest Purchase
