Cantor lowers price target for Strategy shares – but maintains long-term optimism

Cantor lowers price target for Strategy’s shares – but keeps long-term optimism

Cantor Fitzgerald analysts have significantly reduced their price target for Strategy [image]MSTR( shares, while reiterating a “Buy” recommendation for the Bitcoin treasury company, which holds approximately $58 billion in BTC.

According to the investment bank’s Friday report, the team projected a 12-month price target of $229 for MSTR shares, about 59% below the previous estimate of $560. Even so, Cantor reinforced its positive outlook for the company, whose shares have fallen more than 50% over the past six months.

The adjustment reflects a decline in the value analysts attribute to Strategy’s treasury operations, which fell from $364 to $74 per share. Over the next year, analysts now expect the company to raise $7.8 billion in capital markets, instead of the previously forecasted $22.5 billion.

Analysts noted that some market participants fear that the “crypto winter has arrived” — another way to describe a prolonged market recession, during which prices fall and investor interest wanes. At the same time, they described some of the “alarmism” surrounding Strategy as exaggerated.

MSTR shares fell to $178 on Friday, erasing the week’s gains. Meanwhile, Bitcoin’s price fell below $90,000. BTC has dropped nearly 30% since hitting a new high above $126,000 in early October.

The analysts said they have “very little reason to believe” that Strategy would be forced to sell its bitcoins, even as its reliance on issuing preferred shares to buy the cryptocurrency increases. These preferred shares offer dividends, but those are not guaranteed.

On Monday, Strategy established a $1.44 billion “cash reserve” to effectively cover dividend payments for nearly two years. Analysts highlighted that none of Strategy’s convertible debt, totaling $8.2 billion, matures before 2028.

Additionally, it is unlikely that Strategy’s Bitcoin buying activity will simply cease because Bitcoin’s price has recently dropped, the analysts said. However, the largest corporate holder of Bitcoin did acknowledge the possibility of selling it under certain conditions.

If there was a “somewhat justified” fear, it would be Strategy’s exclusion from MSCI indices, the analysts added. Last month, JPMorgan stated that removing Strategy from the global financial company’s products could trigger a $2.8 billion outflow.

Historically, Strategy has increased its Bitcoin holdings by issuing common stock. However, this strategy has become less effective for the company to increase the amount of Bitcoin it holds per share, as its market value has fallen below the value of its cryptocurrency holdings.

Analysts noted that this dynamic, reflected by the drop in Strategy’s so-called mNAV, has been cyclical. This includes the lows of 2022, as well as last year’s highs.

This week, several institutions updated their price targets for Strategy’s shares, which are near a 13-month low. While some analysts have turned bearish, others have maintained their optimistic outlook on the company’s strategic role in the Bitcoin market.