Monness analyst Gustavo Gala reiterated a Sell rating on Strategy today and set a price target of $175.00.
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Gustavo Gala has given his Sell rating due to a combination of factors related to Strategy’s financial and market positioning. One of the primary concerns is the potential for continued contraction in the multiple on Bitcoin holdings, which has already decreased from top quartile levels. This contraction is driven by limited uptake of new issuances meant to replace convertible debt strategies, resulting in a growing dilutive effect on common shares. Additionally, the company’s reliance on raising capital through common stock for Bitcoin purchases raises concerns about future dilution.
Another factor influencing the Sell rating is skepticism about the company’s ability to achieve investment-grade credit ratings, given that profits are primarily unrealized gains. The potential for Bitcoin’s volatility to impact Strategy’s financial stability is also a concern, especially in the absence of a broader market downturn to test its resilience. Furthermore, historical precedents of companies accumulating hard assets with leverage raise cautionary flags. Overall, these factors contribute to a cautious outlook on Strategy’s stock, leading to the reiterated Sell rating and a price target of $175.
Based on the recent corporate insider activity of 95 insiders, corporate insider sentiment is neutral on the stock.