TD Cowen maintains Strategy’s $680 price target after firm purchases another $51.4 million in bitcoin

Over the past week, Michael Saylor’s Strategy purchased another 430 bitcoin for $51.4 million, funded primarily by new stock issuances. The move comes just weeks after Saylor said the firm would not further dilute its equity unless shares traded below 2.5 times the value of its Bitcoin holdings, outside of paying debt interest and preferred equity dividends.

However, the firm already appears to be relaxing that constraint, adding a byline that Strategy may offer new shares "when otherwise deemed advantageous to the company" when its market Net Asset Value (mNAV) is below 2.5x. For reference, Strategy will “actively issue MSTR” to buy BTC when mNAV is above 4x “opportunistically” sell shares when it’s between 2.5x and 4x.

To Strategy bears like Jim Chanos, this may appear hypocritical; though to other analysts, this simply appears to be an apt reallocation of priorities given market conditions and future prospects. In a client note on Monday, TD Cowan calls Strategy "a new kind of firm" that "converts market appetite for volatility and return – on an effectively leveraged basis – into Bitcoin."

"What started as a defensive strategy to protect the value of its reserve assets has become an opportunistic strategy intended to accelerate the creation of shareholder value," TD's analysts wrote. "Strategy intends to continue acquiring and holding bitcoins via proceeds of debt and equity offerings."

Notably, the analysts point to the fact that Strategy isn't directly issuing its common MSTR stock, but instead its preferred share, a class of assets meant to give the firm flexibility in how it raises funds. The past week’s purchases, for instance, were "funded primarily" by about $19 million worth of STRK preferred stock; $18 million worth of STRF preferred stock, and $12 million worth of STRD preferred stock.

The firm is holding its price target steady at $680, on the prediction that by the end of 2027, Strategy will have accumulated 4.3% of Bitcoin’s total supply — i.e., 900,000 coins — and that bitcoin will have reached a price of $232,000. For reference, MSTR is trading at $363, while bitcoin is sitting above $116,000.

Not only that, TD Cowen seems to be pricing in other potentially bullish catalysts, like MSTR possibly being added to the S&P 500 index, increasing clarity around bitcoin tax obligations, and progress in cloud technology, which was once Strategy’s core business and remains a revenue generator.

Further, not even the growing competition of copycat bitcoin treasuries — like Tether-backed Twenty One Capital or David Bailey’s Nakamoto — is much of a challenge. The analysts estimate there are around 160 such firms, some of which could become viable investment vehicles over the coming 12 months.

"To be clear, we view the proliferation of PBTCs as unequivocally bullish for Strategy," they write. "Benefits of additional new entrants will in our opinion likely include further legitimization of the PBTC model, deeper pools of debt and equity capital available to the PBTC space, increased demand for bitcoin, improved accounting standards, and broader adoption of bitcoin and blockchain technologies throughout the traditional financial community."

Earlier this month, Strategy posted positive quarterly earnings showing record net income of $10 billion and a boosted "BTC $ Gain" metric of $20 billion from $15 billion. The firm holds over 3% of the total bitcoin supply.

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