Wall Street is rapidly losing confidence in Strategy’s highly leveraged Bitcoin accumulation model.
Today, wealth management firm Canaccord Genuity came up with a fresh warning about the company slashing its price target on the stock (MSTR) from $163 down to $130.
“Like an automobile, which drives better in forward gear versus reverse, so does MSTR’s BTC acquisition model,” analysts at Canaccord wrote.
Matthew Sigel, VanEck’s head of digital asset research, has stated that this is true for most things on leverage
Attacking the debt-fueled model
Recently, investment bank TD Cowen also significantly lowered its price target on Strategy from $400 to $260.
Notably, TD Cowen maintained a buy rating due to the company’s new “constructive” capital framework. It cited a weaker outlook for Bitcoin as the primary driver for the severe target cut.
Market analysts are warning that the stock’s appeal as a leveraged Bitcoin proxy is waning.
Recently, the company conducted a massive policy reversal by authorizing massive Bitcoin sales.
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As reported by U.Today, Strategy can now liquidate portions of its cryptocurrency holdings. The company plans to sell up to $3.25 billion in Bitcoin to fund its USD reserve, pay preferred dividends, and perform stock buybacks.
Financial commentator Peter Schiff, who recently warned that this monetization program could trigger a market “death spiral,” recently warned about the danger of the company’s dividend obligations.
“The current yield on $STRC is 15%. That means to get the price back up to $100, Strategy must raise the dividend rate from 12% to 15%,” Schiff explained. “That will increase its cash burn, forcing $MSTR to sell more Bitcoin sooner to maintain the new minimum U.S. dollar balance in its cash reserve.”
According to the recent market data, MSTR is currently poised to record its eleventh losing month out of the past twelve. The stock collapsed by approximately 41% in June alone. Most notably, the stock has significantly underperformed Bitcoin itself ever since the debut of STRC.
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