BofA’s Hartnett says concentrated U.S. stock returns are likely to persist
On Tuesday, Benchmark analysts maintained their Buy rating and $650.00 price target for Strategy (NASDAQ:MSTR) shares, representing significant upside potential from the current price of $281.26. According to InvestingPro analysis, the stock appears overvalued at current levels. The firm's analysts commented on Strategy's preannouncement of select first-quarter 2025 results, which included a substantial $5.91 billion unrealized loss on its bitcoin holdings. This loss was partially offset by a $1.69 billion income tax benefit. The loss is attributed to Strategy's recent adoption of the Financial Accounting Standards Board's (FASB) new fair-value accounting rules at the start of the year. These rules mandate that companies must report fluctuations in the market value of their bitcoin holdings on their income statements.
The preannouncement, which was made on Monday, revealed the impact of the volatile cryptocurrency market on Strategy's financials. The FASB's accounting changes are significant as they provide a more immediate reflection of the value of digital asset holdings in a company's financial reporting. For Strategy, whose business model includes substantial investment in bitcoin, this accounting shift has resulted in a notable unrealized loss. InvestingPro data shows the stock has experienced significant volatility, with a beta of 3.47 and a dramatic 77.23% return over the past year.
Strategy's adoption of the FASB's new rules means that the company's financial statements now include the effects of market movements on its bitcoin investments. While this has led to a significant loss on paper due to the current market conditions, the $1.69 billion income tax benefit has helped mitigate the overall impact on the company's financial health. InvestingPro analysis reveals that Strategy maintains a 'Fair' overall financial health score, though its current ratio of 0.71 indicates some liquidity challenges. Get access to 10+ additional ProTips and comprehensive financial metrics with InvestingPro.
The analysts at Benchmark have reiterated their confidence in Strategy by maintaining their Buy rating and price target. This decision comes despite the recent preannouncement and the inherent volatility in the value of Strategy's digital asset holdings.
The market will continue to monitor Strategy's performance, particularly in light of the new accounting standards and their effects on the company's financial reporting. Strategy's approach to bitcoin investment and the broader market's response to cryptocurrency valuations remain key areas of interest for investors and industry observers alike.
In other recent news, Strategy Inc. reported a significant unrealized loss of $5.91 billion on its Bitcoin holdings for the quarter ending March 31, 2025. This loss is attributed to the adoption of new accounting standards that require changes in the fair value of digital assets to be recognized in financial statements. Despite the substantial loss, Strategy did not engage in any sale of its common stock or preferred stock, nor did it purchase additional Bitcoin immediately following the quarter's close. In contrast, the company recently acquired 22,048 bitcoins, costing approximately $1.92 billion, bringing its total holdings to 528,185 bitcoins. TD Cowen has maintained its Buy rating on Strategy's stock, citing optimism over the company's new financial strategies to accelerate Bitcoin purchases. Meanwhile, Monness Crespi Hardt downgraded Strategy's stock to Sell, expressing concerns over the company's reliance on convertible debt for its Bitcoin acquisition strategy. The firm noted potential limitations in Strategy's funding options, as well as the competitive landscape for Bitcoin investments. Strategy also updated its at-the-market offering programs, reporting the sale of 3,645,528 MSTR shares, generating $1.20 billion in net proceeds.
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