Clear Street starts on Strategy with ‘buy’ on leveraged Bitcoin upside

Investing.com -- Clear Street initiated coverage on Strategy, formerly MicroStrategy with a “Buy” rating and a $422 price target given company’s unique leveraged approach to Bitcoin exposure and its ability to grow Bitcoin per share despite dilution.

Unlike passive Bitcoin ETFs, Strategy amplifies its Bitcoin holdings through convertible debt, preferred equity, and opportunistic share issuance.

Over the past year, this strategy has helped Strategy outperform Bitcoin by 54 percentage points.

However, Clear Street cautioned that the company’s leverage cuts both ways, magnifying potential losses if Bitcoin prices decline or if access to capital markets tightens.

Clear Street values Strategy’s total equity at $422 per share, based on three key components that includes Bitcoin treasury operations, Bitcoin holdings, and the company’s software business.

The brokerage projects that Strategy will increase its Bitcoin per share by 15% annually through 2026, a factor it considers in applying a 9x forward valuation multiple, similar to a price-to-earnings framework.

A key driver of Strategy’s value is its capital-raising efficiency.

In 2024, the company raised $22 billion, including $18.8 billion in equity and $6.8 billion in fixed income, using proceeds to acquire more Bitcoin.

As of March 28, Strategy held 506,137 BTC, valued at approximately $42 billion.

Clear Street believes that as institutional Bitcoin adoption accelerates, Strategy’s ability to efficiently accumulate Bitcoin and increase per-share value will continue to set it apart from traditional Bitcoin investment vehicles.

However, risks remain, including dilution, regulatory uncertainty, and macroeconomic factors that could impact capital access and Bitcoin prices.