Analysts on Wall Street Share Insights on Strategy Following Significant Q4 Deficit

The figures were unfavorable, yet the fourth-quarter loss does not indicate a cash crisis or the need for bitcoin sales, according to analysts.

Key points:

• Wall Street analysts assert that Strategy’s significant fourth-quarter losses are primarily due to non-cash accounting entries linked to the decline in bitcoin’s value and do not reflect a liquidity issue or imminent selling pressure.
• With approximately 713,500 bitcoin valued at nearly $50 billion against around $8.2 billion in convertible debt and $2.25 billion in cash, analysts contend that Strategy’s financial position can endure extended bitcoin weakness without violating debt covenants.
• Both TD Cowen and Benchmark continue to hold Buy ratings, perceiving Strategy as a leveraged option for bitcoin exposure.

Wall Street analysts monitoring Strategy (MSTR) generally concur on one aspect following the company’s fourth-quarter earnings report on Thursday: while the reported losses appear substantial, they do not indicate a liquidity crisis or enforced bitcoin sales.

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Strategy reported an operating loss of $17.4 billion and a net loss of $12.6 billion for the quarter, figures primarily influenced by non-cash mark-to-market accounting associated with bitcoin’s BTC$65,998.81 price decrease. Both TD Cowen and Benchmark indicated that the market response overlooked this context, resulting in a roughly 17% drop in shares on a day when bitcoin and other speculative assets were already facing downward pressure.

On Friday, shares rose by 21% as bitcoin recuperated from the previous day’s low of $60,000, climbing back above $70,000.

The two analysts concur that the primary discussion revolves around solvency rather than profitability. Strategy holds 713,502 bitcoin, valued at nearly $50 billion at current market prices, contrasted with about $8.2 billion in convertible debt. Benchmark analyst Mark Palmer noted that the company would only experience significant balance-sheet challenges if bitcoin were to fall below $8,000 and remain at that level for an extended period. Management stressed during the earnings call that none of its debt has covenants or triggers linked to bitcoin’s price or its average purchase cost.

TD Cowen’s Lance Vitanza also emphasized the resilience of the capital structure. He argued that Strategy was intentionally designed to magnify bitcoin’s volatility, with common equity trading at approximately 1.5 times bitcoin’s fluctuations. This leverage has implications in both directions. Vitanza stated that the company’s $2.25 billion cash reserve and staggered debt maturities indicate that there is no plausible scenario in which Strategy would be compelled to sell bitcoin in the near future, even if prices continue to be low.

The divergence among analysts is less about risk and more about the perspective taken. TD Cowen focused on Strategy’s function as a “digital credit engine,” emphasizing its expanding preferred equity business and the liquidity of its STRC preferred stock, which offers an 11.25% annualized dividend. Benchmark, on the other hand, placed greater emphasis on the long-term trajectory of bitcoin’s price and the potential options inherent in Strategy’s equity if bitcoin experiences a rally.

Both firms maintain a positive outlook on the stock. Benchmark reiterated a Buy rating with a price target of $705, based on a sum-of-the-parts model that presumes bitcoin will reach $225,000 by the end of 2026. TD Cowen also upheld a Buy rating, asserting that Strategy remains one of the most effective methods for investors to achieve leveraged bitcoin exposure outside of ETFs, although it did not provide a specific price target in its report.