MicroStrategy Stock Remains a Sell for This Analyst. Here’s Why.

MicroStrategy Executive Chairman Michael Saylor. (Ronda Churchill/Bloomberg)

Who doesn’t love MicroStrategy? Analysts at Monness, Crespi, Hardt.

The firm has been persistently bearish on the stock, rating it at Sell since April, when they downgraded the shares after initiating coverage at Hold less than a month earlier.

That view stands out because among 17 Wall Street tracked by FactSet, all the others expect the stock to rise. Twelve rate the company, now doing business as Strategy, at Buy. Four rate it at Overweight.

The consensus view is that stock in MicroStrategy—once a software company but now mainly an investment vehicle that buys Bitcoin—will rise on a seemingly endless wave of crypto enthusiasm. Shares have risen 169% over the past 12 months and nearly 55% this year.

Monness, Crespi, Hardt doesn’t appear to be abandoning its negative slant soon. Analyst Gus Gala reiterated a Sell rating in a note Tuesday while raising his target price to $200 from $175 to reflect “upward price pressure in Bitcoin.”

The price of the world’s largest cryptocurrency touched a record earlier this week as it crossed $120,000 on Monday. The price has come down since then, falling 2.1% over the past 24 hours to $117,405, according to CoinDesk data. The benchmark S&P 500 was down slightly.

Gala’s target price target is, by far, the lowest on the Street. It represents a potential decline of 55% from the price on Tuesday, with shares trading down 0.7% at $448.06.

In Gala’s view, MicroStrategy’s approach to its 42/42 plan, through which it intends to secure a total of $84 billion of capital over the next two years to fund Bitcoin purchases, has yet to prove its ability to “be stable between equity/debt instruments.”

In other words, the company has been using equity sales more than debt issuance as it raises cash to buy Bitcoin, even though it has said it planned to issue equal amounts of both.

Gala also questions the potential for the valuation to rise as other companies pursue similar so-called treasury strategies, investing corporate funds in Bitcoin, and are more able to issue stock, diluting the holdings of other investors.

In a note last month, Gala cited a number of other companies, described as “cash burning businesses,” that were following in MicroStrategy’s footsteps. The analyst held out GameStop and Trump Media & Technology Group as examples.

Alongside Bitcoin miners and new treasury companies like XXI and Nakamoto, “all of these compete for an ostensibly similar pool of capital,” Gala wrote at the time.

His stance contrasts with that of TD Cowen analyst Lance Vitanza, who raised his price target to $680 from $590 and reaffirmed a Buy rating on the stock in a note Monday.

“What started as a defensive strategy to protect the value of its reserve assets has become an opportunistic strategy intended to accelerate the creation of shareholder value,” Vitanza wrote. “Strategy intends to continue acquiring and holding bitcoins via proceeds of debt and equity offerings.”

In his view, the price of Bitcoin could reach $155,000 by December, which would almost certainly deliver a boost to Strategy’s stock price.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com