Bitcoin Giant Strategy's 'Premium' Nearly Vanished Last Year—Analysts Expect a Comeback
TL;DR
Bernstein analysts predict MicroStrategy's premium to its Bitcoin holdings will recover as Bitcoin's price rises, despite last year's decline. They maintain an 'Overweight' rating with a $450 price target, citing the company's strong cash reserves and potential for continued Bitcoin accumulation.
Key Takeaways
- •MicroStrategy's premium to net asset value (mNAV) fell to 1.02 last year but is expected to recover toward its historical average of 1.57 as Bitcoin's price recovers.
- •The company has built a $2.25 billion cash reserve to pre-pay dividends and could continue acquiring Bitcoin using preferred shares, especially if interest rates fall.
- •Analysts see Bitcoin bottoming and potentially reaching $150,000 by 2026, making MicroStrategy a key beneficiary of price recovery.
- •Risks include potential delisting from MSCI indices (which could trigger outflows) and equity dilution, but analysts view dividend concerns as unwarranted given the company's resources.
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A key piston in Strategy’s growth engine should recover alongside Bitcoin’s price despite sputtering last year, analysts at investment firm Bernstein predicted in a Tuesday note.
Although the Bitcoin-buying firm is currently valued at a slight premium to its digital asset holdings, that premium should enlarge again as investors grow more confident in the Tysons Corner, Virginia-based firm’s ability to hold onto the asset, they wrote.
“As concerns over MSTR’s liquidation event get resolved, we expect a strong recovery in MSTR premium to NAV towards its historical average,” they wrote, noting that the company has historically been valued at a multiple-to-net asset value, or mNAV, of 1.57.
When mNAV is high, Strategy can increase the amount of Bitcoin that it owns per share by selling common shares and purchasing the asset. In the second half of last year, however, mNAV progressively faded, hitting 1.02 on Tuesday, according to Strategy’s website.
Meanwhile, the company has tapped several types of preferred stock as an additional source of funding for purchasing Bitcoin. Those products offer dividend payments, prompting questions on Strategy’s ability to make payments as Bitcoin’s price fell 23% the previous quarter.
Bernstein analysts wrote that Strategy “would be the key beneficiary” of a recovery in Bitcoin’s price. The analysts believe Bitcoin has bottomed and could shoot as high as $150,000 in 2026, after most recently hitting an all-time high above $126,000 in October.
Strategy’s stock price fell more than 6% on Tuesday to about $154, according to Yahoo Finance. Last year, shares dropped more than 50%, despite climbing as high as $457. Following U.S. President Donald Trump’s re-election in 2024, MSTR hit a high of $474.
In Tuesday’s note, Bernstein analysts maintained an “Overweight” rating for Strategy, while reiterating a price target of $450. On Monday, the company disclosed a $17.44 billion unrealized loss in the fourth quarter, pointing to a decline in the value of its Bitcoin holdings.
Recently the company has amassed a $2.25 billion “USD Reserve” to effectively pre-pay dividends, a move that some analysts have described as prudent. Still, others have warned that Strategy’s potential delisting from MSCI indices could prompt billions of dollars in outflows.
Traders on Myriad—a prediction market owned by Decrypt’s parent company, Dastan—foresaw a 17% chance on Tuesday that Strategy will sell Bitcoin this year.
Along those lines, Bernstein analysts described Strategy’s cash reserves as “a fortress.” They added that Strategy could continue to amass Bitcoin using preferred shares, which could become more attractive as dividend-paying products if interest rates fall.
Strategy currently manages $830 million in annual dividend payments, which investors could grow more concerned over if Bitcoin dips below Strategy’s average purchase price of $75,000, the analysts wrote. However, they described those fears as unwarranted, considering the size of Strategy’s stockpile, and obligations on convertible debt that are still several years away.
Still, the analysts described the company’s potential delisting from MSCI indices as a short-term overhang, as well as increased equity dilution.