Analysts remain bullish on Strategy despite 60% YTD stock dip

Strategy has taken a beating this year. The MSTR stock has collapsed 60% year-to-date, erasing $73 billion in market value. But the selloff hasn’t shaken Wall Street.

Out of 19 analysts tracking the company, only three have downgraded it to a sell. The rest are still clinging to buy ratings, some even doubling down. Twelve of them expect shares to explode to $485, a 150% jump from Monday’s close of $189.

Some of the lowest estimates come from Jeffrey Yu at President Capital and Brett Knoblauch at Cantor Fitzgerald. They think the stock will stay near $200. But the next step up in forecasts is $425, and Mark Palmer at Benchmark is calling for $705, nearly 4x the current price.

The optimism hasn’t died down. Not even close.

Bitcoin rebound drives bullish price targets

“In crypto terms, a year is an eon, an awful lot can change,” said Palmer in an interview. That’s Wall Street’s bet on volatility. Bitcoin has bounced back before: in 2017, in 2022, and bulls think it’ll do it again.

That approach, tying equity value to a single digital asset, puts Strategy in a weird league. These types of companies are called digital asset treasuries or DATs, and they don’t get analyzed like normal stocks.

There’s no real valuation model. The share price just floats on Bitcoin’s price movements. Palmer, who remains ultra-bullish, said his target for Bitcoin is $225,000 by end-2026. If that plays out, Strategy flies with it.

Among Nasdaq 100 stocks, Strategy has the largest upside gap between current price and analyst target.

In the broader Russell 1000, it’s in third place, behind Viking Therapeutics and Aurora Innovation. To put that in context, most stocks in the Russell 1000 are trading just 17% below their median target. Strategy’s spread is off the chart.

Saylor’s premium shrinks as competition grows

The company’s wild ride began in August 2020, when Michael Saylor shifted Strategy from enterprise software into Bitcoin. Investors jumped in fast. Shares surged 600% in six months. At one point, the stock traded at a 2.5x premium over Bitcoin’s price; people were paying more for exposure to the coin through Strategy than for the coin itself.

Then came the copycats. New DATs popped up everywhere. And with them, Strategy’s premium got crushed. It’s now down to 1.2x, as the market for listed crypto exposure has become saturated.

That erosion is why Gus Gala, an analyst at Monness, Crespi, Hardt & Co., slashed his Strategy rating to sell in April. He didn’t think it would get into the S&P 500, nor did he believe it would earn an investment-grade credit rating. S&P Global Ratings gave it a B- junk rating in October. But after the stock tanked, Gala upgraded it to neutral in November.

“There’s abundant economic incentive for share sales to continue and for capital raises to continue or for the underwriting to continue,” Gala said. “But the demand will be the demand, and I think that’s what you’ve seen play out.”

Gala doesn’t expect a return to the old premium levels. “Will it go back to two times premium, possibly at some point, probably like near the peak of next cycle. But is that a sustainable end state, I don’t think so.”

Even firms that cut their targets still see upside. Bernstein slashed its price estimate by 25% on Monday. Cantor Fitzgerald cut theirs by 59% last week. But both still think the stock is heading higher from here.

Strategy may be bleeding, but the bulls haven’t left the building. Bitcoin was trading at $93,844 at press time.

Sharpen your strategy with mentorship + daily ideas - 30 days free access to our trading program