- Citigroup has more than doubled its price target for Strategy as the bank raises its 12-month Bitcoin forecast and assumes a higher valuation multiple for the company.
Citigroup has raised its price target for Strategy Inc. (NASDAQ: MSTR) to $240 from $136, according to a research note cited in the market report circulated by Walter Bloomberg on X. Citi also raised its 12-month base-case Bitcoin forecast by 39% to about $113,000. The bank maintained its Buy rating on Strategy shares.
Strategy has become one of the most direct ways for public-market investors to gain exposure to Bitcoin because the company holds hundreds of thousands of BTC on its balance sheet. The latest target increase comes as Bitcoin climbed above $86,000 on Oct. 2, lifting Strategy and other crypto-linked stocks.
Citi Raises Bitcoin Forecast and Strategy Valuation
Citi's revised Strategy target reflects two main changes in its valuation model. The bank estimates that roughly 34% of the potential upside in its $240 target comes from its higher Bitcoin price assumption. Citi also expects an expansion in Strategy's market-value-to-net-asset-value, or mNAV, multiple to contribute about 16% of the potential upside.
Citi raised its Bitcoin Yield Multiple assumption to 4.0 times from 2.5 times, resulting in an estimated mNAV of about 1.24 times, compared with 1.065 times previously.
The bank has also pointed to historical periods in which Strategy's mNAV traded between roughly 1.25 and 1.50 when Bitcoin remained above the $85,000-$90,000 range. Citi is using a more conservative valuation assumption because of the company's cash-reserve strategy, according to summaries of the research note.
Strategy's Bitcoin holdings make the company's stock particularly sensitive to changes in the cryptocurrency's price. The company can also use equity and other financing methods to acquire additional Bitcoin, creating another layer of exposure between the cryptocurrency and its common shares.
MSTR Remains Closely Tied to Bitcoin
Strategy added 1,665 Bitcoin during the week ended Sept. 27, bringing its holdings to 847,666 BTC, according to market reports. The size of those holdings means changes in Bitcoin's market value can have a significant effect on Strategy's balance sheet and the valuation investors assign to its shares.
Bitcoin's move above $86,000 on Friday helped push MSTR higher in premarket trading, while other crypto-linked stocks including Coinbase Global Inc. (NASDAQ: COIN) also advanced. Citi's revised $240 target is therefore heavily dependent on its Bitcoin forecast and its assumption that Strategy can maintain a premium to the underlying value of its cryptocurrency holdings.
If Bitcoin reaches Citi's projected level and Strategy's mNAV expands as assumed, those factors support the bank's higher target. If Bitcoin falls short of the forecast or the valuation premium contracts, the assumptions behind the target would change.