By Mackenzie Tatananni

MicroStrategy stock could sink as it becomes increasingly difficult for the largest corporate holder of Bitcoin to snap up more cryptocurrency, one analyst argued.

Monness, Crespi, Hardt & Co. analyst Gus Gala downgraded MicroStrategy to Sell from Neutral and established a $220 price target in a research note Tuesday. Shares were up 2.2% to $249.99 in morning trading.

Gala's price target assumes a 25% premium to the value of the 554,000 Bitcoin he expects MicroStrategy to have by year end: some $58 billion, based on the latest price. Bitcoin was up 1.5% over the past 24 hours to $83,665 on Tuesday, according to CoinDesk data.

Originally founded as an enterprise software company in 1989, MicroStrategy, now doing business as Strategy, is commonly viewed as a leveraged play on Bitcoin. The company held 471,000 Bitcoins at the end of 2024.

MicroStrategy must borrow money to buy more digital tokens, Gala noted. However, he believes it will become incrementally harder to raise money as financing gets more expensive. MicroStrategy has sold stock, preferred stock, and bonds to do so.

"While we were negative on several respects upon initiation, we have gained incremental confidence that the convertible issuance strategy is likely tapped," Gala wrote. The firm began covering MicroStrategy on March 19 with a Neutral rating.

Gala said the market's absorption of preferred stock the company has issued has been lower than expected, saying that it "highlights limits" to the company's Bitcoin treasury goals.

The analyst expects MicroStrategy to rely more upon fixed income issuance to make its planned Bitcoin purchases this year. "If fixed income securities do not become a greater portion of issuance, the BTC treasury strategy will look increasingly challenged," Gala added.

The company's latest purchase brought its total Bitcoin holdings to 528,185 units of the digital currency as of March 30. Including debt, MicroStrategy is worth about $90 billion today, with its Bitcoin holdings worth about $44 billion.

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

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April 01, 2025 10:44 ET (14:44 GMT)

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