On Monday, the American investment bank TD Cowen released a research report, reiterating a target price of $680 for bitcoin investment giant Strategy (formerly MicroStrategy). At the time of this assessment, Strategy again increased its purchase of 430 bitcoins, investing approximately $51.4 million, mainly from a new round of preferred stock issuance.
Just a few weeks ago, Strategy co-founder and executive chairman Michael Saylor assured investors that unless used to pay debt interest or preferred stock dividends, new shares would not be issued when the company's stock price is below 2.5 times the holding value of coins. This indicator is also known as 'mNAV premium,' which has long been a tool for Strategy's fundraising, as it allows raising funds at a high valuation and then buying bitcoins at a discount.
However, the latest announcement shows that the company's position has become more flexible, adding a caveat: 'If deemed in the company's interest, new shares may still be issued when mNAV is below 2.5 times.'
According to Strategy's established strategy:
When mNAV is above 4 times, the company will actively issue new shares to purchase bitcoins;
When mNAV is between 2.5 and 4 times, adjustments may be made by selectively selling shares.
"Defense" turns into "Offense"
For short-seller investors like Jim Chanos, such a turn may seem contradictory; but in the eyes of TD Cowen analysts, it is a flexible strategy for the company to adapt to market changes and reallocate resources.
TD Cowen describes in the report that Strategy is 'a new type of company' that transforms market demand for volatility and returns into bitcoins based on effective leverage.
Analysts point out that Strategy's initial bitcoin buying actions were originally aimed at protecting the company's asset value, but have now evolved into an 'opportunistic strategy to accelerate shareholder value creation,' aiming to continue buying and holding bitcoins through debt issuance and stock issuance.
It is noteworthy that this time, Strategy's additional bitcoin purchases were not made through common stock (MSTR), but rather relied on three different types of preferred stock, namely STRK ($19 million), STRF ($18 million), and STRD ($12 million). This flexible financing structure provides the company with more leverage.
Long-term forecast: Strategy's holdings could reach 4.3% of the total bitcoin supply.
According to TD Cowen's model estimates, Strategy could hold 4.3% of the total bitcoin supply (approximately 900,000 coins) by the end of 2027, assuming the price of bitcoin could rise to $232,000 by then.
If calculated this way, MSTR's stock price is expected to reach $680 (current stock price is about $363), with potential upside still exceeding 80%.
TD Cowen further points out several potential positives:
MSTR has the opportunity to be included in the S&P 500 index;
The regulations regarding tax obligations for bitcoins in the United States are gradually becoming clearer;
Strategy's original cloud technology business still contributes to revenue.
Holding coins for 5 years shows an unrealized profit of over $26.2 billion.
Since first purchasing bitcoins in 2020, Strategy has accumulated 629,000 bitcoins, with a total value of approximately $72.4 billion. Calculating at an average cost of $73,320, the company has invested a total of about $46.2 billion, currently showing an unrealized profit of up to $26.2 billion.
At the beginning of the month, Strategy announced its financial results, showing total revenue of $114.5 million for the second quarter, a year-on-year increase of 2.7%; compared to a loss of $200.3 million in the same period last year, Strategy's net profit surged to $10.02 billion in the second quarter.
"Investing an additional 430 bitcoins! Strategy aggressively accumulates coins without hesitation, investment bank sets target price at $680" This article was first published by (Block Business).
