Making up for Strategy’s (MSTR) sharp price decline, Cantor Fitzgerald’s Brett Knoblauch cut his 12-month price target for Strategy (MSTR) from $560 to $229, citing a weaker environment for raising bitcoin-related capital. .
The new target still suggests an upside of nearly 30% from the current price of $180, with Knoblauch retaining its overweight.
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 wonderfully for years, propelling MSTR to eye-popping 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 to its bitcoin stack. Combined with Bitcoin’s poor price performance, this sent MSTR down approximately 70% from its late 204 high.
Cantor now calculates the strategy’s fully adjusted market net asset value (mNAV) at just 1.18x – still a premium but down from much higher levels in the past. This prevents Michael Saylor and his team from raising money through potentially dilutive common stock sales.
Knoblauch reduced his forecast for Strategy’s annual capital market revenue to $7.8 billion from $22.5 billion. The value attributed to Strategy’s treasury operations — essentially the upside it can capture by raising capital and buying bitcoin — fell from $364 per share to just $74.
Still, Knoblauch didn’t give up on the business. “This is due to both falling Bitcoin prices and falling multiples,” he wrote in his Friday note. Although he views the current market as a headwind, his overweight reflects confidence that the strategy could work again if bitcoin prices recover and investor appetite for leveraged exposure returns.
This view was echoed in a separate note from Mizuho, which took a more optimistic stance on Strategy’s near-term financial situation. Following a $1.44 billion capital raise, the company 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 the need to sell Bitcoin.
At a recent event hosted by Mizuho, CFO Andrew Kang outlined a cautious approach to future fundraising. He said the company does not intend to refinance its convertible debt before the first maturity in 2028. It will instead rely on preferred shares, which give it access to capital while preserving its bitcoin holdings.
Kang also made it clear that the company would only start issuing new shares again when its mNAV exceeds 1 – a signal that the market is once again valuing its Bitcoin exposure at a premium. If this does not happen and capital becomes more difficult to raise, bitcoin sales could be considered, but only as a last resort.
The company appears to be taking a cue from its 2022 playbook, when it suspended bitcoin purchases during a market downturn and resumed purchases once conditions improved. Analysts say this strategy – remaining patient and liquid – could help Strategy weather the current crisis.
Read more: Strategy Remains Top Bitcoin Proxy, Benchmark Says, Rejecting ‘Doom’ Narrative
