Strategy Stock Performance and Analyst Outlook
Strategy has experienced a significant downturn this year, with its stock price collapsing 60% year-to-date and erasing $73 billion in market value. Despite this substantial selloff, Wall Street analysts have largely maintained their positive outlook on the company.
Out of 19 analysts currently tracking Strategy, only three have downgraded the stock to a "sell" rating. The majority continue to hold "buy" ratings, with some even increasing their positions. Twelve analysts anticipate shares will surge to $485, representing a 150% increase from Monday's closing price of $189.
While some analysts, such as Jeffrey Yu at President Capital and Brett Knoblauch at Cantor Fitzgerald, have set lower price targets near $200, the next tier of forecasts climbs to $425. Mark Palmer at Benchmark holds the most optimistic view, projecting a target of $705, which is nearly four times the current stock price.
This sustained optimism indicates that the bullish sentiment surrounding Strategy has not diminished.
Bitcoin Rebound Drives Bullish Price Targets
"In crypto terms, a year is an eon, an awful lot can change," remarked Palmer in an interview. This sentiment reflects Wall Street's underlying bet on volatility. Bitcoin has demonstrated a history of rebounds, notably in 2017 and 2022, and bulls believe it is poised to do so again.
Strategy's business model, which ties its equity value directly to a single digital asset, places it in a unique category. Companies like Strategy are often referred to as digital asset treasuries (DATs) and are not analyzed using traditional stock valuation models. Instead, their share prices tend to fluctuate in tandem with Bitcoin's price movements.
Palmer, who remains highly bullish, has set a target of $225,000 for Bitcoin by the end of 2026. He anticipates that Strategy's stock price will rise in correlation with this projected Bitcoin performance.
Among stocks listed on the Nasdaq 100, Strategy exhibits the largest projected upside gap between its current price and its median analyst target price.
In the broader Russell 1000 index, Strategy ranks third in this regard, trailing only Viking Therapeutics and Aurora Innovation. For comparison, most stocks within the Russell 1000 are trading approximately 17% below their median target price, highlighting the unusually large spread for Strategy's stock.
Saylor's Premium Shrinks as Competition Grows
The company's volatile trajectory began in August 2020 when Michael Saylor pivoted Strategy from its enterprise software focus to encompass Bitcoin. This strategic shift initially led to a rapid influx of investor interest, with shares surging 600% within a six-month period. At its peak, the stock traded at a premium of 2.5 times Bitcoin's price, indicating that investors were willing to pay more for exposure to Bitcoin through Strategy than for Bitcoin itself.
However, the emergence of copycat companies and new DATs led to increased competition. Consequently, Strategy's premium has significantly decreased, now standing at 1.2x, as the market for listed crypto exposure has become more saturated.
This erosion in premium was a key factor in Gus Gala, an analyst at Monness, Crespi, Hardt & Co., slashing his Strategy rating to "sell" in April. Gala had expressed doubts about the company's potential inclusion in the S&P 500 and its ability to secure an investment-grade credit rating. S&P Global Ratings assigned Strategy a "B-" junk rating in October. However, following the stock's sharp decline, Gala upgraded his rating to "neutral" in November.
“There’s abundant economic incentive for share sales to continue and for capital raises to continue or for the underwriting to continue,” Gala stated. “But the demand will be the demand, and I think that’s what you’ve seen play out.”
Gala does not foresee a return to the previous high premium levels. He commented, “Will it go back to two times premium, possibly at some point, probably like near the peak of next cycle. But is that a sustainable end state, I don’t think so.”
Even firms that have reduced their price targets still anticipate future growth for the stock. Bernstein recently lowered its price estimate by 25% on Monday, and Cantor Fitzgerald cut theirs by 59% last week. Despite these adjustments, both firms maintain that the stock is headed higher from its current position.
While Strategy has faced considerable challenges, its bullish proponents remain engaged. At the time of this report, Bitcoin was trading at $93,844.