Strategy (MSTR) has been one of the most talked-about Bitcoin proxy plays on Wall Street. The stock has seen a strong run, with the stock up about 16% year-to-date and 152% over the past year. Despite the stock rally and the enthusiasm around Bitcoin, Monness analyst Gus Gala reiterated his Sell rating on the stock and kept his price target of $175 in a new report, implying about 50% downside potential from current levels. He warned that Strategy’s premium over its Bitcoin holdings has already come down sharply, with more room for it to shrink.
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Why Gala Sees Downside for MSTR Stock
Gala pointed out that Strategy’s funding model creates mounting risks for shareholders. Under its “42/42 Capital Plan,” the company has relied on convertible debt and new bond deals. But with lower volatility reducing the appeal of convertibles, the company has leaned more on newer bond offerings, which now total about $3.4 billion. These deals have gained traction but come with high interest costs, putting pressure on equity holders.
Since access to traditional debt markets remains limited, Gala expects that Strategy will keep issuing stock to finance Bitcoin purchases. This adds dilution for existing investors and weighs on the valuation multiple.
He also cautioned that the company’s strategy is no longer unique, as more firms adopt similar Bitcoin treasury models. At the same time, Bitcoin’s price is increasingly driven by broader macro forces rather than company-specific moves, leaving Strategy more exposed to market swings.
Valuation Pressure Likely to Persist
On the valuation front, Gala stressed that Strategy’s premium to its Bitcoin holdings is already shrinking and is likely to compress further. The stock’s multiple has fallen to 1.34x from a recent 1.8x peak, compared with a peer group median of 1.21x. Given the company’s heavy reliance on stock issuance, he expects this downward pressure on the multiple to persist, limiting upside for the shares.
Is MSTR Stock a Buy?
The stock of Strategy has a consensus Strong Buy rating among 12 Wall Street analysts. That rating is based on 11 Buy and one Sell recommendations assigned in the last three months. The average MSTR price target of $575.83 implies 70.58% upside from current levels.
