Cantor Fitzgerald Reduces Price Target on Strategy
Cantor Fitzgerald has significantly reduced its 12-month price target on Michael Saylor’s Bitcoin-focused company, Strategy, while maintaining a bullish long-term outlook for Bitcoin. The firm cut its target by 60%, from $560 down to $229, reflecting the stock’s underperformance compared to previous expectations. Despite this adjustment, Cantor Fitzgerald has reiterated its “buy” rating on the stock. The firm believes that widespread concerns about forced liquidation are exaggerated and do not accurately represent the company’s current financial standing. Strategy's stock has experienced a difficult year, declining 27% in the past month and 35% year-to-date, with its shares trading around $186 at the time of reporting. As the ninth-largest shareholder, Cantor Fitzgerald's assessment carries considerable market influence. This report comes at a time when Strategy remains a prominent public market proxy for Bitcoin exposure.
Investor Takeaway
Cantor's downgrade is attributed to valuation pressures rather than a loss of confidence in Strategy’s Bitcoin-centric business model. The firm asserts that fears of imminent liquidation are not supported by the company’s cash reserves.
Analysis of Forced Liquidation Risks
Analysts at Cantor Fitzgerald have stated that Strategy possesses "enough cash" to cover its dividend obligations for 21 months and has the capacity to secure additional funding through equity facilities if necessary. They further commented, "Absent a 90% pullback from current BTC levels, This Fear is Not Warranted." The market narrative has been dominated by discussions regarding whether Strategy’s aggressive Bitcoin accumulation strategy could compel the company to sell its holdings if prices were to fall sharply. Cantor Fitzgerald has countered this perspective, arguing that Strategy’s available liquidity options, including the issuance of equity, diminish the probability of forced selling. The firm also highlighted that Strategy’s recent stock performance has significantly lagged behind earlier projections, making the revised price target a more realistic reflection of current market conditions rather than assumptions about severe Bitcoin downturns.
Impact of MSCI's Digital Asset Holdings Threshold
Another factor impacting Strategy is the proposed rule from the MSCI Index that would exclude companies whose digital asset holdings constitute more than 50% of their total assets. Strategy significantly surpasses this threshold due to its extensive Bitcoin reserve strategy. Cantor Fitzgerald acknowledged the risk of index exclusion, stating it could lead to "forced selling of MSTR" and characterizing this concern as "somewhat warranted." However, they limited this risk to near-term investor flows rather than posing a threat to the company's solvency. If implemented, such a rule would mechanically affect Strategy’s stock, as index funds would be compelled to sell shares, increasing supply irrespective of the company's fundamentals. This would not impede Strategy’s ability to hold Bitcoin or continue its current treasury strategy, but it could introduce volatility during rebalancing periods.
Investor Takeaway
The MSCI reclassification is viewed as a short-term flow-related issue rather than a fundamental structural threat. While Strategy’s Bitcoin exposure remains unchanged, index-driven selling could exert downward pressure on the stock.
Bitcoin's Outlook and the Revised Price Target
Cantor Fitzgerald maintains a projection of sustained strength for Bitcoin in the long term, despite recent market corrections. The firm described the recent pullback as "healthy" and reiterated its belief that Bitcoin is progressively nearing the market capitalization of gold. The report stated, "We continue to believe that we are not far away from Bitcoin overtaking Gold’s market cap." Currently, Bitcoin represents approximately 6.1% of gold's total market size. Cantor Fitzgerald calculated that Bitcoin would need to reach $1,577,860 to surpass gold at current valuations. Other market analysts share similar long-range expectations; Joe Burnett, an analyst, recently projected that Bitcoin could exceed $1.8 million by 2035. Nevertheless, Bitcoin would need to appreciate roughly sixteenfold from its current levels to match gold's market value, a considerable gap that persists even during periods of strong upward momentum. Over the past year, gold has seen a 58% increase, outperforming Bitcoin, which has experienced a 1.5% decline year-to-date, according to TradingView data.
Future Outlook for Strategy's Stock
The stock is currently trading significantly below both Cantor Fitzgerald's previous and revised price targets. While Strategy’s stock performance is closely correlated with Bitcoin’s price movements, external factors such as index regulations, equity-raising conditions, and broader market sentiment are likely to continue influencing its share price. Cantor Fitzgerald's balanced perspective—a reduced valuation target coupled with a reaffirmed bullish stance—suggests that the firm views Strategy’s underlying business model as sound, even if short-term pressures warrant a more cautious outlook. The company's capacity to avert forced sales, maintain liquidity flexibility, and remain aligned with its Bitcoin reserve strategy are critical components of the investment thesis.