With the cryptocurrency winter clearly setting in, bulls must now look for signs that the downtrend has become so entrenched that a bottom could be forming.
A good example might be a note from Canaccord’s Joseph Vafi published on Wednesday, reducing his price target on the strategy (MSTR) by a whopping 61%, from $474 to $185.
Vafi, who raised his outlook on the strategy as recently as November (to that $474 level), still maintains a buy rating on the stock, and his new target of $185 suggests roughly 40% upside from last night’s close of $133.
The strategy is now down 15% year-to-date, 62% year-over-year and 72% from its November 2024 record.
Bitcoin, Vafi said, is in the midst of an “identity crisis,” still fitting the profile of a long-term store of value but increasingly trading like a risk asset. This tension manifested itself during the October crypto crash, when forced liquidations accelerated sales.
Although often touted as “digital gold,” bitcoin has failed to keep pace with the recent rally in precious metals, he continued. While gold has rallied due to geopolitical tensions and macroeconomic uncertainty, bitcoin has lagged, highlighting its continued reliance on liquidity and risk appetite rather than safe-haven demand.
The strategy is designed to withstand volatility, the report said. The company holds more than $44 billion in bitcoin against about $8 billion in convertible debt, including $1 billion putable in 2027 that remains in the money. Preferred dividends are manageable through modest stock issuance, even though MSTR’s market cap no longer offers a significant premium to the value of its BTC holdings.
Quarterly results will arrive this week, but they have become largely insignificant given Strategy’s near-total dependence on BTC, Vafi continued. A significant unrealized loss related to the Bitcoin sell-off in the fourth quarter is expected.
Vafi’s new $185 target assumes a 20% rebound in Bitcoin prices and a recovery in the company’s mNAV to around 1.25x.
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