Strategy (MSTR) Stock Jumps 9% as Bitcoin Rebounds to $70,000

TLDR

• Strategy (MSTR) stock jumped 9.2% to $134.34 Friday as Bitcoin rallied toward $70,000 following softer U.S. inflation data that showed CPI dropping to 2.4%.
• The company won’t sell Bitcoin and plans to fund future purchases through perpetual preferred shares (STRC) instead of common stock dilution, accounting for 97.5% of corporate Bitcoin additions in January.
• Strategy posted a large Q4 GAAP loss of $42.93 per share driven by mark-to-market Bitcoin writedowns, missing analyst estimates by $88.95.
• Analysts maintain a “Moderate Buy” rating with a $374.14 average price target, though forecasts range from $340 to $1,000 depending on Bitcoin’s performance.
• Weekly RSI fell below 30 in week 66, matching the technical pattern that marked the previous cycle bottom when MSTR traded at much lower levels.

Strategy stock surged 9.2% to $134.34 during Friday’s trading session as Bitcoin pushed toward the $70,000 mark. The rally came after U.S. inflation data showed CPI dropping to 2.4%, the lowest level in four years.

Strategy Inc, MSTR

Volume reached 14.29 million shares, down 43% from the average session volume of 25.2 million. The stock had closed at $123.00 the previous day.

The softer inflation reading sparked a broader rally in risk assets. Monthly consumer prices rose just 0.2%, easing concerns about persistent inflationary pressure. Markets interpreted the data as supporting potential Federal Reserve rate cuts ahead.

Bitcoin-related stocks moved higher in tandem. Coinbase climbed 16.5%, while Marathon Digital and Riot Platforms gained 9% and 7% respectively. The coordinated movement highlighted the strong correlation between Bitcoin’s price action and companies tied to the crypto sector.

Strategy now holds Bitcoin worth billions on its balance sheet. The company accounted for roughly 97.5% of corporate Bitcoin additions in January, according to data-driven reports. This dominant position has made the stock highly sensitive to Bitcoin price swings.

Executive Chairman Michael Saylor reiterated that the company will not sell its Bitcoin holdings. Management plans to continue purchasing Bitcoin through a new funding mechanism that shifts away from common stock issuance.

Funding Strategy Shifts to Preferred Shares

Strategy announced it will fund future Bitcoin purchases through perpetual preferred shares trading under the ticker STRC. These instruments pay high variable dividends designed to attract yield-focused investors.

The move reduces dilution risk for common shareholders. However, it changes the company’s capital structure and introduces a new investor base with different return expectations.

Some analysts view the preferred share strategy as a way to stabilize fundraising without constantly tapping equity markets. Others raised concerns about the high dividend costs and how preferred shareholders might react during Bitcoin downturns.

Several outlets reported the stock initially fell when the company emphasized this preferred-share transition. Investors worried about liquidity constraints and the impact of high preferred yields on the overall capital structure.

Despite these concerns, Zacks Research upgraded Strategy to a “strong buy” rating Tuesday. The firm cited oversold conditions and recent Bitcoin-per-share accumulation as bullish catalysts. H.C. Wainwright also highlighted steady Bitcoin-per-share growth as supporting the company’s valuation.

Q4 Results Show Mark-to-Market Losses

Strategy reported Q4 earnings on February 5th, posting a loss of $42.93 per share. The company missed analyst estimates of $46.02 by $88.95. Revenue came in at $122.99 million, up 1.9% year-over-year and slightly above the $117.42 million estimate.

The large loss stemmed from mark-to-market Bitcoin writedowns under GAAP accounting rules. The company recorded a negative net margin of 806.34% and negative return on equity of 8.74%. These accounting losses don’t reflect actual Bitcoin sales, but they demonstrate the stock’s leverage to short-term Bitcoin volatility.

Short-seller Jim Chanos and other critics have targeted the company’s governance and messaging around its Bitcoin strategy. A Seeking Alpha analyst downgraded the stock, citing concerns about the preferred share structure and management’s promotional tone.

BTIG Research set a $250 price target with a buy rating in early February. Canaccord Genuity established a $185 target, also with a buy rating. The consensus among analysts sits at “Moderate Buy” with an average price target of $374.14.

Technical analysts offered varying predictions for how high the stock could climb. One analyst suggested MSTR could reach all-time highs and potentially $1,000 if Bitcoin continues its current bullish structure, echoing patterns from 2021-2022. Another analyst outlined a more conservative price target around $340 based on wave patterns.

The weekly Relative Strength Index fell below 30 last week in the 66th week of the current cycle. In the previous cycle, MSTR bottomed when weekly RSI dropped below 30 after 65 weeks, raising questions about whether a cycle bottom is forming now.

Director Jane Dietze purchased 1,000 shares at $99.48 on January 20th, increasing her position by 38.46% to 3,600 shares. Institutional investors hold 59.84% of the stock, with several funds adding positions during the second quarter.

Bitcoin traded at $69,789 at press time, up 1.13% over the past day. Some analysts identified an “Adam and Eve” pattern forming in Bitcoin’s chart, which traders consider a bullish formation. A move above $72,000 could open the path toward $80,000.

The post Strategy (MSTR) Stock Jumps 9% as Bitcoin Rebounds to $70,000 appeared first on CoinCentral.