Wall Street analysts are standing firmly behind Strategy's (MSTR) aggressive escalation of its bitcoin (BTC) acquisition strategy

"While the number of companies that have sought to replicate Strategy's bitcoin acquisition strategy has continued to grow rapidly …"

Wall Street analysts are standing firmly behind Strategy’s (MSTR) aggressive escalation of its bitcoin (BTC) acquisition strategy after the company unveiled plans to double its capital-raising ambitions.

While the number of companies that have sought to replicate Strategy’s bitcoin acquisition strategy has continued to grow rapidly … MSTR yesterday issued a reminder of the extent of its first-mover advantage and how its ability to accelerate its accumulation of bitcoin has increased as its platform has scaled,” said Benchmark's Mark Palmer, who maintains a buy rating and a $650 price target on the shares.

Pointing out that MSTR trades at more than double the value of its bitcoin holdings, which may seem "a high multiple at first glance," Palmer adds that level is "attractive" thanks to Executive Chairman Michael Saylor and team's "demonstrated ability to create shareholder value through their treasury operations."

Alongside reporting its 1Q23 results Thursday evening, Strategy announced an expansion of its recent 21/21 plan - which saw the company set out to raise $42 billion via issuance of common stock and debt (or debt-like securities) - to a total of $84 billion. The company also announced an increase in its bitcoin-related performance targets, including a 25% BTC Yield target by 2025 (vs. 15% previously) and $15 billion BTC $ Gain (vs. $10 billion).

The move comes as Strategy looks to capitalize further on the booming demand for bitcoin in the wake of the recent cryptocurrency winter.

However, also acknowledging the ambition of the updated strategy, TD Cowen's Lance Vitanza says it is "aggressive perhaps but by no means out of the question."

In a note to clients Friday, Vitanza - who has a buy rating and a $550 price target on the shares - highlighted that Strategy has already raised $28.3 billion under the original 21/21 Plan and that the company’s significantly larger $111 billion market cap and deep trading liquidity attest to the credibility of the new fundraising efforts.

With average daily share volume of $5.6 billion, Vitanza suggested that raising another $56.7 billion over the next 32 months is realistic.

Both analysts highlighted that Strategy has already made significant progress towards its bitcoin-related performance targets, having achieved ~90% of its original BTC Yield target in just four months.

MSTR shares are up 1.8% to $388 in early Friday trading as bitcoin continues to trade slightly below the $67,000 level.

Earnings call highlights

“The adoption of the Bitcoin standard by more companies is beneficial, legitimizing bitcoin and attracting more capital, ” said Saylor on the post-earnings conference call Thursday evening. “As more companies join, it stabilizes and drives up bitcoin's price. Each market needs its own BTC companies, and as more join, it accelerates the transition to the bitcoin standard, pressuring others to join.”

Addressing concerns over dilution, CEO Fong Li highlighted the accretive nature of the equity raises:

“Issuing equity at greater than one times mNAV [the multiple of the company's net asset value] is accretive, not dilutive. As mNAV rises, equity issuance becomes more like fixed income, and we aim to make the fixed income market more efficient.”

Pointing to the company's $5.9 billion unrealized loss in 1Q23 due to bitcoin’s price decline under newly adopted fair value accounting, CFO Andrew Kang said:

“Despite the volatility, we believe the transparency is vital… We expect more positive swings over time, aligning with our long-term strategy.”