Monness Crespi Hardt’s new stock price target implies more than 25% downside, as recent sales of securities to buy bitcoin haven’t gone very well.
MicroStrategy Inc. (NASDAQ: MSTR) has recently received its first bearish rating from Monness Crespi Hardt analyst Gus Gala, who advises investors to sell the stock following the company's extensive Bitcoin acquisitions.
Downgrade Details
Gala downgraded MicroStrategy's stock from neutral to sell, setting a price target of $220. This target suggests a potential decline of 26.6% from its current trading levels. Notably, this is the lowest price target for MicroStrategy among Wall Street analysts.
Bitcoin Acquisition Strategy
Between March 24 and March 30, MicroStrategy purchased 22,048 bitcoins for $1.92 billion. This brings their total Bitcoin acquisitions for March to $2.51 billion and for 2025 to $7.66 billion. The company now holds 528,185 bitcoins, valued at approximately $44.92 billion.
Market Response and Financial Concerns
Despite the downgrade, MicroStrategy's stock experienced a 4% increase on Tuesday, ending a four-day losing streak. However, Gala expressed concerns about the market's lukewarm reaction to the company's recent debt and preferred stock sales intended to finance Bitcoin purchases. He highlighted that the market appears saturated, making it more expensive for MicroStrategy to raise additional funds.
Competition and Strategic Challenges
Other companies, such as Mara Holdings and GameStop, have also announced plans to raise capital for Bitcoin acquisitions. This increased competition could potentially impact MicroStrategy's strategy and market position.
Analyst Perspectives
This bearish outlook contrasts with previous analyst sentiments. For instance, Jefferies downgraded MicroStrategy to 'Underperform' in July 2022, citing challenges in the macroeconomic environment and the company's premium valuation despite low growth. Additionally, in November 2024, Seeking Alpha highlighted concerns about MicroStrategy's overvaluation and its heavy reliance on Bitcoin, suggesting a potential 50% drop in stock value.
Conclusion
Gus Gala's recent downgrade underscores growing apprehensions about MicroStrategy's aggressive Bitcoin investment strategy and its implications for the company's financial health and stock performance. Investors are advised to carefully consider these factors when evaluating MicroStrategy's stock.
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