Citigroup gives a "Strategy Buy" rating due to optimism about bitcoin's prospects

ChainCatcher news, according to CoinDesk, investment bank Citigroup has initiated coverage on Strategy (MSTR) for the first time, assigning a Buy/High Risk rating and a target price of $485, positioning the stock as a leveraged bet on bitcoin.

In early U.S. trading on Tuesday, MSTR shares rose by 1.5%, trading around $301. In a report released on Tuesday, Citigroup stated that the target price reflects its forecast that bitcoin will reach $181,000 in 12 months, representing a 63% upside from current levels, as well as a 25% to 35% net asset value (NAV) premium, which aligns with Strategy's historical bitcoin return multiple of 2.5x to 3.5x.

Citigroup analysts believe that this structure makes the stock an amplified bet on bitcoin's performance, with significant upside potential in a bull market, but also the possibility of a sharp pullback if prices reverse. Citigroup noted that in the most pessimistic scenario, if bitcoin drops by 25% and the NAV premium shifts from 35% to a 10% discount, the stock could lose about 61%. The report states that Strategy is expected to continue issuing convertible bonds, preferred shares, and stocks based on the NAV premium to expand its bitcoin holdings.