Strategy has undergone another revision of its Wall Street price target, with Canaccord adjusting its assessment of the company, while reaffirming the enduring investment potential of Bitcoin.
Summary
- Canaccord has reduced Strategy’s price target to $130 but maintains that its long-term outlook for Bitcoin remains intact.
- The firm asserts that Strategy’s Bitcoin-focused business model remains sustainable, even with moderate annual growth in Bitcoin values.
- Analysts from TD Cowen, Cantor Fitzgerald, and Benchmark continue to endorse Strategy, albeit with adjustments to their price targets.
Bitcoin outlook remains solid despite adjusted valuation
According to Canaccord’s research report, Strategy’s price target has been decreased from $163 to $130, a change attributed to the ongoing decline in the company’s share price rather than a revised long-term outlook for Bitcoin. This update comes after several months of challenging performance for Strategy’s stock, though the firm maintains a consistent investment thesis regarding the cryptocurrency.
After the previous trading session, shares of Strategy closed at $86.93, slightly above their 52-week low of $81.81, and around 77% lower than their value from a year earlier. The stock saw an increase of 8.12% to $93.96 following the announcement of its new Digital Credit Capital Framework.
Canaccord emphasized that Bitcoin continues to benefit from its limited supply and the increasing adoption of blockchain technology. The brokerage highlighted that Bitcoin is becoming more firmly established within financial markets and is now less ambiguous in its classification as either a speculative asset or a long-term store of value.
Canaccord also stated that Strategy’s business model centered on Bitcoin remains viable as long as Bitcoin experiences moderate annual growth, even as recent market performance has not met those expectations.
“We believe there is nothing fundamentally wrong here, either in the company’s model or in Bitcoin, suggesting a potential rebound makes sense in the medium term.”
Additionally, data from the report indicated that Strategy’s Relative Strength Index has entered oversold territory, and Fair Value analysis suggests the shares may be trading below their estimated intrinsic value.
Capital strategy continues to gain analyst support
This latest adjustment follows a prior target reduction from TD Cowen, which lowered its price target for Strategy from $400 to $260 while maintaining a “buy” rating. TD Cowen attributed the decrease to a conservative long-term forecast for Bitcoin prices, rather than any issues related to Strategy’s newly launched Digital Credit Capital Framework.
TD Cowen noted that its revised target still indicates nearly 200% upside from current trading levels. The firm described the new capital framework as a positive development that could enhance Strategy’s financial flexibility, despite the stock’s decline following the announcement.
In a regulatory filing dated June 29, Strategy disclosed that its Digital Credit Capital Framework allows the company to potentially raise up to $1.25 billion through Bitcoin sales if necessary. The proceeds may be utilized for maintaining U.S. dollar reserves, funding preferred dividends, addressing interest obligations, enhancing cash reserves, and financing future share buybacks.
The filing also authorized up to $1 billion in the repurchase of the company’s Digital Credit Securities, which includes STRC, STRF, STRD, and STRK, dependent on management’s assessment that the buybacks would strengthen the firm’s capital structure. Furthermore, Strategy indicated it has halted further Bitcoin purchases while having sold approximately $1.15 billion worth of MSTR shares as part of its capital management strategy.
On Wall Street, Cantor Fitzgerald has reiterated its Overweight rating and $212 price target, showing confidence in Strategy’s liquidity strategies. Benchmark also reaffirmed its Buy rating, sustaining a $570 price target, noting that although the company’s preferred shares have weakened recently, Strategy has continued to grow its Bitcoin holdings.
