Investment bank Citi (C) initiated coverage of the strategy (MSTR) with a Buy/High Risk rating and a $485 price target, positioning the stock as a leveraged bet on Bitcoin. ,
MSTR shares were up 1.5% at $301 in early trading Tuesday.
The price target reflects Citi’s 12-month Bitcoin forecast of $181,000, a 63% upside from current levels, and a 25% to 35% net asset value (NAV) premium, which aligns with the strategy’s historical 2.5x to 3.5x Bitcoin yield multiple, the bank said in a Tuesday report.
That structure, the bank’s analysts argue, makes the stock an amplified play on Bitcoin’s performance, with sharp rises in bullish markets and sharp declines if prices reverse.
Under Citi’s bearish scenario, with a 25% decline in Bitcoin and a NAV premium swinging from a 35% to a 10% discount, the stock could decline by about 61%.
The bank credits the company’s turn to Bitcoin in 2020 under the leadership of Executive Chairman Michael Saylor as a model for its digital asset treasury strategy.
The strategy hopes to expand its Bitcoin position through the issuance of convertible debt, preferred equity and stock based on NAV premium, the report said.
The company’s Bitcoin yield, the year-over-year increase in BTC per fully diluted share, has been a key driver of the NAV premium, the report said.
The strategy said in a filing on Monday that it had bought another 112,051 BTC at an average price of $168, bringing total holdings to 640,418 BTC.
Read more: Strategy Increases Bitcoin Holdings to 640,418 BTC with Latest Purchase