Strategy shares closed the day down more than 8%, ending at $84.68, despite the company’s announcement of its new Digital Credit Capital Framework. While the sell-off intensified, Benchmark E
Strategy shares closed the day down more than 8%, ending at $84.68, despite the company’s announcement of its new Digital Credit Capital Framework. While the sell-off intensified, Benchmark Equity Research reaffirmed its “buy” recommendation for the stock and repeated its ambitious $570 price target.
Benchmark’s price target implies an upside potential of around 515% compared to Monday’s closing price. The firm says the new framework equips management with additional tools for security buybacks, managing preferred share obligations, and generating cash from Bitcoin holdings during times of market stress.
Nevertheless, the stock’s weakness persisted. The sharp downturn over the past week has renewed concerns about the company’s capital structure. Notably, Strategy’s floating-rate preferred security, STRC, which is typically targeted to trade near $100, recently fell below $80.
Benchmark analyst Mark Palmer commented that Strategy can now manage both sides of its capital structure more actively, marking a significant positive for shareholders.
The new capital framework includes a $2.55 billion reserve, equating to 17.4 months of dividend coverage. The plan also authorizes a $1 billion common stock repurchase program and a $1 billion buyback authorization covering preferred shares, including STRC, STRF, STRD, and STRK.
Mini glossary: Preferred shares are securities that have priority over common stocks in terms of dividends and liquidation claims. Net asset value premium means a company’s stock trades at a price above the total value of its underlying assets.
FirmRecommendationTarget pricePrevious targetBenchmarkBuy$570UnchangedTD CowenBuy$260$400Canaccord GenuityBuy$130$163The Strategy board has also approved the sale of up to $1.25 billion worth of Bitcoin from its treasury, which holds 847,363 BTC. Benchmark noted that, compared to the company’s total Bitcoin reserves, this is a modest authorization, suggesting that concerns about aggressive Bitcoin sales may be overstated.
With the new plan, the company now has the flexibility to halt common stock offerings during periods when its shares are not trading at a premium to net asset value. Management is also empowered to initiate both stock and preferred security buybacks when they see value-adding opportunities.
TD Cowen reaffirmed its “buy” recommendation but slashed its price target for Strategy from $400 to $260. The firm attributed this revision to lower Bitcoin price expectations, rather than directly to the new capital framework.
Canaccord Genuity also reduced its 12-month target to $130 from $163, while maintaining its “buy” rating. The company highlighted continued volatility in Bitcoin, risks within Strategy’s capital structure, and investor concerns about its funding model as sources of pressure on the stock.
In its assessment, Canaccord notes that Strategy’s Bitcoin accumulation model only works efficiently in a forward-moving market; when the trend reverses, performance suffers.
Strategy introduced its new capital framework after MSTR shares tumbled roughly 30% the previous week. At one point, the company’s market capitalization dropped below the total value of its Bitcoin holdings, compounding investor anxiety.
The structure of preferred shares is also under close watch in the market. STRC, which sits above common shares in the capital structure, is designed to show less volatility than MSTR. However, questions remain over how future dividend liabilities on these securities will be funded, intensifying dilution concerns.
Strategy’s performance remains closely tied to the price of Bitcoin. As of the latest trading, Bitcoin was hovering around $58,487, having fallen nearly 20% in June. MSTR is on track for a monthly drop of roughly 41% — its steepest since 2022. Following the $540 peak reached in November 2024, both Bitcoin and MSTR shares have suffered sustained declines: since the debut of STRC, Bitcoin has lost around 50% in value, while MSTR is down approximately 77%.
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