KBW Starts Coverage of Strategy with Outperform Rating, Noting Leveraged Bitcoin Exposure Potential.

KBW Starts Coverage on Strategy with Outperform Rating, Focuses on Bitcoin Exposure Potential

KBW has initiated coverage of Strategy (formerly known as MicroStrategy), assigning the company an outperform rating and a $560 price target, highlighting the firm’s substantial leverage to Bitcoin (BTC) exposure.

Shares of Strategy rose by 1% in early trading, reaching approximately $329. According to KBW analyst Bill Papanastasiou, the company is expected to benefit significantly from adopting the new Financial Accounting Standards Board (FASB) standards for Bitcoin holdings in the first quarter of 2025. The shift from the outdated accounting method to fair value accounting will have unrealized gains and losses directly reflected in net income.

For Q4 2024, Strategy reported a $1 billion impairment loss, primarily because the company did not yet adopt the updated FASB rules.

KBW noted that to be eligible for inclusion in the S&P 500 index, a company must have positive net earnings for both the most recent quarter and the preceding four quarters. The adoption of the updated accounting standards could help Strategy meet these criteria and make its way into the index.

As the company holds the largest Bitcoin treasury of any public company, it has a significant opportunity to further expand its Bitcoin holdings. Additionally, Strategy could generate on-chain yield through applications built on the Bitcoin network, adding another layer of growth potential.

The report also highlighted the possibility that Bitcoin’s network could experience substantial value unlocking due to the development of applications, as Bitcoin remains the most secure, decentralized, and valuable blockchain in the market.

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