Cantor Fitzgerald Cuts MicroStrategy Price Target but Maintains Bullish Bitcoin Outlook
Cantor Fitzgerald has lowered MicroStrategy's 12-month price target to $229, which represents approximately a 59% decrease from the prior target of $560. Despite this reduction, the firm maintains an Overweight rating and a long-term bullish stance on Bitcoin.
The adjustment reflects a decreased valuation of MicroStrategy's treasury operations, falling from $364 per share to $74. The forecast for next-year capital raises has also dropped significantly, from $22.5 billion to $7.8 billion. Analysts acknowledge market fears surrounding a crypto winter but consider the negative sentiment toward MicroStrategy to be exaggerated.
Following the announcement, MicroStrategy shares declined to $178 on Friday, erasing gains made earlier in the week. Meanwhile, Bitcoin has fallen below $90,000, down roughly 30% from its October peak of over $126,000.
Analysts note that MicroStrategy has limited incentive to sell its Bitcoin holdings, though the company's dependence on issuing preferred shares to acquire more Bitcoin has increased. These preferred shares yield dividends, though these payments are not guaranteed. The company has established a $1.44 billion cash reserve to cover nearly two years of dividend obligations, and has convertible debt amounting to $8.2 billion maturing in 2028.
One potential risk highlighted is the possibility of MicroStrategy's removal from MSCI indices, which JPMorgan has suggested could lead to outflows totaling about $2.8 billion. While Bitcoin acquisitions via issuing common stock continue, this strategy is less effective as MicroStrategy's market capitalization has fallen below its crypto holdings.
Market value NAV is described as cyclical, exhibiting lows in 2022 and highs last year. The current week has also seen updates to price targets from other institutions, with TD Cowen taking a bearish stance and Benchmark maintaining a bullish outlook on the company.
