A crucial driver behind Strategy’s expansion is expected to rebound in tandem with Bitcoin’s price, despite its underperformance last year, according to analysts from the investment firm Bernstein in a report released Tuesday.
Even though the company that acquires Bitcoin currently trades at a modest premium over its digital asset holdings, this premium is anticipated to widen again as investor confidence strengthens in the Tysons Corner, Virginia-based enterprise’s capacity to retain its assets.
“Once concerns about MSTR’s potential liquidation event are alleviated, we foresee a robust recovery of MSTR’s premium relative to NAV back toward its historical norm,” they stated. Historically, the firm has been valued at approximately 1.57 times its net asset value (mNAV).
A higher mNAV enables Strategy to boost the amount of Bitcoin it holds per share by issuing common stock and using proceeds for additional purchases. However, during the latter half of last year, this multiple steadily declined and reached 1.02 as of Tuesday according to Strategy’s official website.
In addition to common shares, Strategy has utilized various preferred stock offerings as alternative funding sources for acquiring more Bitcoin. These preferred stocks provide dividend payments which raised concerns about Strategy’s ability to meet these obligations amid a 23% drop in Bitcoin prices during the previous quarter.
Bernstein analysts emphasized that Strategy stands poised as “the primary beneficiary” should Bitcoin prices recover. They believe that Bitcoin has likely bottomed out and could surge up to $150,000 by 2026 after recently peaking above $126,000 last October.
The price of Strategy’s shares fell over 6% on Tuesday down to roughly $154 based on data from Yahoo Finance. Despite this decline—shares plunged more than 50% throughout last year—they previously soared as high as $457 following U.S. President Donald Trump’s re-election campaign announcement for 2024 when MSTR hit an all-time high near $474.
In their latest note issued Tuesday, Bernstein maintained an “Overweight” rating on Strategy while reaffirming their price target at $450 per share. On Monday priorly reported was a staggering unrealized loss totaling $17.44 billion during Q4 due primarily due declines in bitcoin valuation held by company assets.
Lately,the company established around $2.25 billion USD reserve funds intended effectively prepay dividends —a strategy some experts praise for prudence—though others caution possible removal from MSCI indices might trigger substantial capital outflows reaching billions.
On prediction markets like Myriad—which belongs under Decrypt parent Dastan—traders assigned approximately a seventeen percent probability on Tuesday that Strategic will liquidate some portion of bitcoin holdings within this calendar year.
The Bernstein team characterized Strategic cash reserves metaphorically “as fortress-like.” Furthermore they suggested continued accumulation through preferred shares remains feasible; such instruments may gain appeal if interest rates decline given their dividend-paying nature
This entity presently manages annual dividend payouts totaling around eight hundred thirty million dollars—a figure investors might scrutinize further if bitcoin dips below average acquisition cost near seventy-five thousand dollars per coin—but analysts deem those worries exaggerated considering both scale reserves alongside convertible debt maturities scheduled years ahead
Nonetheless short-term risks persist including probable exclusion from MSCI benchmarks plus increased dilution effects stemming equity issuance activities noted by experts monitoring market dynamics closely</ p>