How are energy investors positioned?
On Thursday, Cantor Fitzgerald analyst Brett Knoblauch increased the price target for Strategy (NASDAQ:MSTR) to $619 from the previous $613, while maintaining an Overweight rating on the company’s shares. Currently trading at $16.93, the stock has seen significant volatility, moving within a 52-week range of $12 to $513.80. The analyst’s commentary highlighted that Strategy’s valuation is primarily influenced by its Bitcoin strategy, rather than its core business of business intelligence and analytics software. For deeper insights into Strategy’s valuation metrics and technical indicators, InvestingPro subscribers have access to comprehensive analysis tools.
Strategy has significantly expanded its Bitcoin holdings, adding 195,250 Bitcoin in the fourth quarter, ending 2024 with a total of 447,470 Bitcoin. This increase represents a roughly 77% growth in its Bitcoin position from October to December. Following the end of the year, the company continued to acquire more Bitcoin, with its total holdings reaching 471,107 bitcoins as of the week ending January 27, 2025. The company’s aggressive Bitcoin acquisition strategy has significantly impacted its stock performance, with a YTD return of -39.73% and a 6-month return of -96.54%, according to InvestingPro data.
The company had previously announced a 21/21 strategy during its last earnings release, which involves raising $21 billion in equity and $21 billion in debt to fund Bitcoin purchases over the next three years. Since the announcement on October 31, Strategy has already raised approximately $16.8 billion in equity through the issuance of 48.8 million Class A common shares. Additionally, it has raised around $3.6 billion in debt through its 2029 zero-coupon convertible note and a recently closed 8% perpetual preferred stock offering.
Shareholders of Strategy have approved an amendment to increase the number of authorized Common A shares from 330 million to over 10 billion and authorized preferred stock from 5 million to over 1 billion. This move sets the stage for further capital market activities from Strategy as a Bitcoin treasury company.
Strategy is aiming for a Bitcoin Yield of over 15% in 2025, up from the current 6-10%, and a Bitcoin dollar gain of $10 billion. These targets depend on the premium at which shares trade relative to Strategy’s Bitcoin position. Currently, the company’s shares trade at an adjusted equity premium of 110%. To realize a $10 billion gain, Strategy would need to raise approximately $19 billion at this premium level. In fiscal year 2024, the premium fluctuated between 65.1% at the beginning of the year and peaked at 232.9% on November 11.
With the anticipation that 2025 will be a favorable year for Bitcoin due to seasonality and potential regulatory and political support, the analyst expressed confidence in Strategy’s ability to achieve its financial targets. The analyst also suggested that if Bitcoin dollar gains are considered as earnings, Strategy’s current trading valuation is less than 10 times earnings, which is a key aspect that many on Wall Street may be overlooking about the company’s capital markets momentum. This perspective reaffirms the Overweight rating and the raised price target. With average daily trading volume reaching 20.42M shares over the past three months, investors seeking comprehensive analysis can access additional valuation metrics, technical indicators, and expert insights through InvestingPro.
In other recent news, MicroStrategy continues to be a focal point for investors due to its significant Bitcoin holdings. Analyst Ed Engel from Compass Point reiterated his Buy rating on the company, maintaining a $550.00 target price. Engel suggests that MicroStrategy offers investors a leveraged exposure to Bitcoin, which could potentially increase in value due to anticipated U.S. regulations and growing institutional adoption by 2025.
Engel also addressed the seemingly counterintuitive nature of MicroStrategy’s net asset value (NAV) premium, suggesting a 100% premium could be justified and sustained due to the company’s implied volatility, particularly in bull markets. This volatility, according to Engel, creates favorable conditions for convertible financing, supporting MicroStrategy’s strategy to enhance its Bitcoin holdings per share.
Moreover, Engel believes MicroStrategy has the potential to generate yield from its Bitcoin treasury, following a trend where publicly listed companies earn income through Bitcoin staking and lending. These recent developments underscore MicroStrategy’s unique approach to Bitcoin investment, a strategy that continues to draw attention as the crypto market evolves and institutional interest in digital assets grows.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.