Michael Saylor-led MicroStrategy (Nasdaq: MSTR), now Strategy, announced on June 22 that it bought 520 Bitcoin (BTC) for $35 million, sold $335.5 million worth of MSTR shares, and grew its U.
Michael Saylor-led MicroStrategy (Nasdaq: MSTR), now Strategy, announced on June 22 that it bought 520 Bitcoin (BTC) for $35 million, sold $335.5 million worth of MSTR shares, and grew its U.S. dollar reserve by $300 million to $1.4 billion.
Benchmark Equity Research analyst Mark Palmer doubled down on its Buy rating on Strategy and reiterated a $570 price target the same day, as per Investing.com.
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In his note, Palmer addressed the concern around Stretch (STRC), Strategy's perpetual preferred stock that pays 11.50% annual dividends that are payable semi-monthly in cash.
The stock recently hit its record low price of $82.53 on July 18.
Palmer dismissed the comparison between the STRC stock's performance and the 2022 collapse of TerraUSD and Luna, saying these instruments operate under fundamentally different structures.
Unlike TerraUSD, STRC isn't a stablecoin or an asset backed by a reflexive token system reliant on arbitrage mechanisms, he argued.
“Strategy’s objective has been to support STRC’s trading at a level near $100, not to guarantee it,” Palmer explained.
“In our view, what has happened with STRC is best described not as a depeg—something that was never pegged cannot be depegged—but as a market-driven reset of required yield.”
The analyst said STRC’s variable dividend reset framework, liquidity profile, and Strategy’s expanding cash reserve intended to support dividend flexibility and treasury management during periods of tighter capital markets are also factors that people should pay attention to.
The recent STRC trading activity, including elevated volumes during the selloff, indicates active repricing instead of any deterioration, he added.
The recent selloff of both MSTR and STRC stocks is a stress test of Strategy’s funding model and not any indication of a structural breakdown, the analyst concluded.
Palmer reiterated the price target of $570 for the MSTR stock. Since the stock closed at $109.46 on June 22, the target represents an upside for more than 400%.
Related: MicroStrategy CEO discloses 3 reasons behind Bitcoin sale
