Investment bank Citi (C) initiated coverage of Strategy (MSTR) with a buy/high risk rating and a $485 price target, positioning the stock as a leveraged bet on bitcoin BTC$113,197.67.
MSTR shares were 1.5% higher in early trading on Tuesday, around $301.
The price target reflects Citi’s 12-month bitcoin forecast of $181,000, representing 63% upside from current levels, and a 25% to 35% net asset value (NAV) premium, which aligns with Strategy’s historical 2.5x to 3.5x bitcoin yield multiple, the bank said in the Tuesday report.
That structure, the bank’s analysts argued, makes the stock an amplified play on bitcoin’s performance, with outsized upside in bull markets and sharp drawdowns if prices reverse.
Under Citi’s bear-case scenario, with bitcoin down 25% and the NAV premium swinging from 35% to a 10% discount, the stock could lose about 61%.
The bank credits the company’s pivot to bitcoin in 2020, led by Executive Chairman Michael Saylor, as the model for the digital asset treasury strategy.
Strategy is expected to keep issuing convertible debt, preferred equity and stock, depending on the NAV premium, to expand its bitcoin position, the report said.
The report noted that the company’s bitcoin yield, the year-to-date increase in BTC per fully diluted share, has been a key driver of the NAV premium.
Strategy said it had purchased another 168 BTC at an average price of $112,051, bringing total holdings to 640,418 BTC, in a filing on Monday.
Read more: Strategy Expands Bitcoin Holdings to 640,418 BTC With Latest Purchase
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