Simply put
- Cantor Fitzgerald has reduced its price target for Strategy stock.
- Despite this, the analysts at the investment bank maintain an optimistic view.
- They mentioned there is one concern that feels “somewhat justified.”
Cantor Fitzgerald analysts have significantly cut their price targets for Strategy. Yet, they reiterated an “overweight” rating for the stock in their note on Friday. The company is notable for holding around $58 billion in Bitcoin.
The firm set a new 12-month price target of $229 for Strategy stock, which is a steep 59% drop from the prior estimate of $560. But even with that, Kanter stressed a positive outlook for the company, despite its stock having plummeted over 50% in the last six months.
This adjustment signifies a lower valuation for Strategy’s financial operations, dropping from $364 per share to $74 per share. Analysts are now forecasting the company to generate $7.8 billion from capital markets, instead of the earlier $22.5 billion projection.
Some analysts expressed concern that a “crypto winter” might be upon us, indicating a protracted market downturn where prices decline and investor enthusiasm wanes. However, they also noted that some of the “fear mongering” directed at Strategy seems exaggerated.
On Friday, Strategy stock dropped to $178, wiping out the profits of that week, while Bitcoin fell below $90,000, having declined nearly 30% since it peaked at over $126,000 in early October.
Despite the reliance on preferred stock issuance to acquire Bitcoin, analysts believe there’s “little reason to think” that Strategy will have to sell off its Bitcoin holdings. Preferred stocks, while beneficial for dividend payments, don’t provide guaranteed returns.
In addition, Strategy reportedly has $1.44 billion in cash reserves, which should sustain about two years’ worth of dividend payments. Notably, all of Strategy’s convertible notes, amounting to $8.2 billion, won’t mature until 2028.
Analysts think it’s unlikely Strategy will halt its Bitcoin purchasing activities just because of the recent price slides. Still, the largest holder of Bitcoin has acknowledged that selling could be a possibility under specific circumstances.
If there’s a “somewhat justified” concern, it would be regarding the possibility of Strategy being removed from MSCI’s indexes. Last month, JP Morgan suggested that such removal could trigger a $2.8 billion outflow.
Strategy had previously boosted its Bitcoin reserves through issuing common stock, but that tactic is now less effective due to the company’s market cap being lower than its crypto asset value.
Analysts pointed out that the recent moves reflect a cyclical shift in Strategy’s so-called mNAV, which takes into account last year’s highs and the lows of 2022.
With stock prices near 13-month lows, a range of financial institutions have revised their price targets for Strategy stocks this week, with TD Cowen adjusting its stance, while others continue to express optimism.
