Investment bank Citi ( C ) initiated coverage of the strategy ( MSTR ) with a buy/high risk rating and a price target of $485, positioning the stock as a leveraged bet on bitcoin .
MSTR shares were 1.5% higher in early trading Tuesday, around $301.
The price target reflects Citi’s 12-month bitcoin forecast of $181,000, representing 63% upside from current levels, and a 25% to 35% net asset value (NAV) premium, which is consistent with the Strategy’s historical 2.5x to 3.5x bitcoin yield, the bank said in Tuesday’s report.
That structure, the bank’s analysts argued, makes the stock a heightened bet on bitcoin’s performance, with outsized upside in bull markets and sharp moves if rates reverse.
Under Citi’s bear-case scenario, with bitcoin down 25% and the NAV premium fluctuating from 35% to a 10% discount, the stock could lose about 61%.
The bank credits the company’s pivot to bitcoin in 2020, led by chairman Michael Saylor, as a model for the digital asset’s financial strategy.
The strategy is expected to continue issuing convertible debt, preferred stock and equity, depending on the NAV premium, to expand its bitcoin position, the report said.
The report noted that the company’s bitcoin yield, the year-to-date increase in BTC per fully diluted share, has been an important driving force for the NAV premium.
Strategy said it had bought another 168 BTC at an average price of $112,051, bringing its total holdings to 640,418 BTC, in a filing on Monday.
Read more: Strategy Expands Bitcoin Holdings to 640,418 BTC with Latest Buys
