Here’s how Wall Street analysts are reacting to Strategy following a significant fourth-quarter loss

Analyst Perspectives on Strategy's Latest Earnings

Following Strategy's (MSTR) fourth-quarter financial report, Wall Street analysts largely concur that, despite the striking headline losses, the company is not facing a liquidity crunch or being forced to liquidate its bitcoin holdings.

Strategy posted an operating loss of $17.4 billion and a net loss of $12.6 billion for the quarter. These substantial figures are primarily the result of non-cash mark-to-market adjustments reflecting the recent drop in bitcoin (BTC) prices. Both TD Cowen and Benchmark noted that the market's negative reaction overlooked this context, leading to a 17% decline in Strategy's share price on a day when bitcoin and other risk assets were already experiencing downward pressure.

However, shares rebounded by 21% on Friday as bitcoin surged from a low of $60,000 back above $70,000.

Solvency Remains the Key Focus

Both analysts agree that the main issue is Strategy's solvency, not its profitability. The company currently holds 713,502 bitcoins, valued at nearly $50 billion at present prices, while its convertible debt totals about $8.2 billion. According to Benchmark's Mark Palmer, Strategy would only encounter significant financial strain if bitcoin's price dropped below $8,000 and remained there for an extended period. Management also clarified during the earnings call that none of its debt agreements are tied to bitcoin's price or the company's average purchase price of bitcoin.

Capital Structure and Risk Management

Lance Vitanza from TD Cowen emphasized the resilience of Strategy's capital structure. He pointed out that the company is intentionally structured to magnify bitcoin's price movements, with its equity typically moving about 1.5 times as much as bitcoin itself. This leverage can amplify both gains and losses. Vitanza also highlighted that Strategy's $2.25 billion in cash and staggered debt maturities ensure that the company is unlikely to be forced to sell its bitcoin holdings in the near future, even if market conditions remain challenging.

Differing Analyst Emphases

While both firms see limited risk, their perspectives differ in emphasis. TD Cowen views Strategy as a "digital credit engine," noting the growth of its preferred equity business and the liquidity of its STRC preferred shares, which offer an 11.25% annual dividend. Benchmark, on the other hand, focuses more on bitcoin's long-term price potential and the upside embedded in Strategy's equity if bitcoin appreciates.

Outlook and Ratings

• Benchmark maintains a positive outlook, reaffirming its Buy rating and setting a $705 price target, based on a model that assumes bitcoin will reach $225,000 by the end of 2026.
• TD Cowen also continues to rate the stock as a Buy, describing Strategy as one of the most effective ways for investors to access leveraged bitcoin exposure outside of ETFs, though it did not specify a price target in its latest report.