Strategy Shares Dip as Citi Calls It a High-Risk, High-Reward Stock
Citi, an investment bank, began covering Strategy with a $485 price target and a buy/high-risk rating. The stock is being positioned by the bank as a leveraged wager on Bitcoin. However, despite this development, early Thursday trading saw MSTR shares trading at about $280, down 6.99%.
Citi Forecasts 63% Gain for MSTR if Bitcoin Hits $181K
Citi‘s 12-month Bitcoin projection of $181,000 is reflected in the price target. This number indicates a 25% to 35% net asset value (NAV) premium and a 63% increase over current levels. This number is in line with Strategy’s historical Bitcoin return multiple of 2.5 to 3.5 times, the bank said in its report on Tuesday.
According to the bank’s analysts, this structure makes the stock a more powerful investment in the success of Bitcoin. In bull markets, it delivers disproportionate upside, but if prices turn around, it may see steep declines. In Citi’s worst-case scenario, the NAV premium would decrease from 35% to 10%, and Bitcoin would fall by 25%. The MSTR stock might drop about 61% in this scenario.
From 2020 to Today: How Is Strategy’s Bitcoin Plan Evolving?
The bank attributes the blueprint for the digital asset treasury technique to the company’s 2020 shift to Bitcoin, which was spearheaded by Executive Chairman Michael Saylor. Depending on the NAV premium, the strategy is anticipated to continue issuing convertible debt, preferred equity, and stock. According to the report, this strategy attempts to increase its position in Bitcoin. The research also pointed out that one of the main factors influencing the NAV premium has been the company’s bitcoin yield, or the rise in BTC per fully diluted share over the course of the year.
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