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Investing.com -- Citi initiated coverage of Strategy (NASDAQ: MSTR) with a Buy rating and a $485 price target in a note on Tuesday, citing the company’s leveraged exposure to Bitcoin and its role as a digital asset treasury pioneer.
“We initiate MSTR at a Buy/High Risk,” Citi analyst Peter Christiansen wrote, adding that its target “is based on Citi’s forward 12-month rolling base-case Bitcoin forecast of $181k (63% upside from current levels)” and its view that “MSTR’s NAV premium can range 25%-35%.”
Christiansen called Strategy “a Digital Asset Treasury (DAT) company making its stock a leveraged and more volatile play on Bitcoin.”
Citi believes the stock “offers amplified returns on the upside but can also result in sharp underperformance on the downside.”
Under its bear-case scenario, where Bitcoin declines about 25 percent, Citi estimated Strategy’s shares “could decline 61% ceteris paribus.”
Citi noted that under the leadership of Michael Saylor, Strategy “pioneered the digital asset treasury system in 2020 by being the first publicly traded company to adopt Bitcoin as its primary treasury reserve asset.”
The company now holds about 3 percent of total Bitcoin in circulation and “plans to continue issuing convertible debt, preferred equity, and MSTR stock” to expand those holdings.
Citi said its $485 target assumes a 25–35 percent NAV premium versus a near-term Bitcoin yield of roughly 10 percent.
“Success does beget success in this model,” the analyst wrote, noting that Strategy’s NAV premium has historically averaged about “3.0x the QoQ change in BTC yield.”
Citi said less than 2 percent of its valuation comes from Strategy’s underlying software business.