MicroStrategy Stock Faces Risk as Analyst Doubts Bitcoin Buying Strategy

MicroStrategy Stock Faces 30% Downside: Analyst Issues Sell Rating Amid Bitcoin Strategy Concerns

MicroStrategy Stock – MicroStrategy (MSTR), which has seen a staggering 2,500% increase in its stock price over the past five years due to aggressive Bitcoin (BTC) purchases, could soon face a major downturn, according to a recent analysis. Gus Gala, an analyst at Monness Crespi, downgraded MSTR from neutral to sell, just two weeks after initiating coverage. Gala’s concerns center on MicroStrategy’s strategy of raising funds through share issuance to buy more Bitcoin, which may soon become unsustainable.

Bitcoin Acquisition Strategy Hits Limits

Currently, MicroStrategy holds 528,185 BTC on its balance sheet, with the company purchasing large amounts nearly every week in recent months. However, Gala warns that the company has already tapped into most of its resources, having raised $18.6 billion from its $21 billion common share at-the-market offering. This reliance on shares to fund Bitcoin purchases may not be viable much longer. Gala set a price target of $220 for MSTR, indicating a potential downside of nearly 30% from its current price around $300.

Shift Towards Fixed Income May Be Imminent

Gala suggests that MicroStrategy will face increasing difficulty raising funds through equity issuance, which could force the company to pivot to fixed income securities. If this shift does not happen, the company’s Bitcoin treasury strategy could face significant challenges. This is compounded by the fact that MicroStrategy also raised $711 million last week via its second series of preferred stock, STRF, but even these measures may not be enough to sustain the current strategy.

A Key Moment for MicroStrategy’s Bitcoin Strategy

As MicroStrategy’s aggressive Bitcoin strategy faces growing challenges, investors are now closely monitoring the company’s next moves. The increasing difficulty of raising funds through share issuance poses a significant risk to the company’s long-term strategy of using Bitcoin as a corporate asset. The coming months will be critical in determining whether MicroStrategy can maintain its market position or if the pressure will mount on its balance sheet.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrencies and stocks, particularly in micro-cap companies, are subject to significant volatility and risk. Please conduct thorough research before making any investment decisions.