Strategy Gets Buy Rating From Citi Bank With $485 Price Target on Bitcoin Bet

TLDR

• Citi initiated coverage of Strategy with a buy/high risk rating and $485 price target
• The bank forecasts bitcoin reaching $181,000 within 12 months, representing 63% upside
• Strategy holds 640,418 BTC as of October 19, making it the largest corporate bitcoin holder
• Under Citi’s bear case with bitcoin down 25%, Strategy stock could lose about 61%
• Strategy recently purchased 168 BTC at an average price of $112,051

Investment bank Citi started coverage of Strategy with a buy/high risk rating and set a $485 price target for the stock. The rating positions Strategy as a leveraged bet on bitcoin performance.

Strategy shares traded 1.5% higher in early Tuesday trading around $301. The Citi price target reflects the bank’s 12-month bitcoin forecast of $181,000.

MicroStrategy Incorporated, MSTR

That bitcoin forecast represents 63% upside from current price levels. Citi expects Strategy to maintain a 25% to 35% net asset value premium.

The premium aligns with Strategy’s historical 2.5x to 3.5x bitcoin yield multiple. This structure creates potential for amplified returns when bitcoin prices rise.

The leveraged nature cuts both ways for investors. Citi’s bear case shows potential for steep losses if bitcoin declines.

If bitcoin drops 25% and the NAV premium swings to a 10% discount, Strategy stock could lose about 61%. The volatility stems from the company’s concentrated bitcoin exposure.

Strategy has transformed itself since 2020 under Executive Chairman Michael Saylor. The company pioneered what’s known as the digital asset treasury strategy model.

Corporate Bitcoin Holdings

Strategy purchased another 168 BTC at an average price of $112,051 according to a Monday filing. This brings total holdings to 640,418 BTC.

At current prices, the holdings are valued at approximately $7.06 billion. This makes Strategy the largest corporate holder of bitcoin.

The company continues to expand its bitcoin position through various funding methods. These include convertible debt, preferred equity and stock issuances.

The timing of these capital raises depends on the NAV premium. Higher premiums make equity issuances more attractive for expanding bitcoin positions.

Stock Performance Metrics

Strategy stock has gained 34% over the past year. This outpaces the S&P 500’s 15% gain during the same period.

However, the stock lags bitcoin’s 62% jump over the past year. The underperformance reflects pressure on the NAV premium from expected at-the-market issuance programs.

The company’s bitcoin yield has been a key driver of its NAV premium. This metric tracks the year-to-date increase in BTC per fully diluted share.

Citi analyst Peter Christiansen expects bitcoin to surge to new records. The buy/high risk rating from Citi compares with more conservative ratings from other analysts.

Strategy purchased its latest batch of 168 BTC at an average price of $112,051, bringing total holdings to 640,418 BTC as of October 19.

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