Increasing Bitcoin holdings but facing a target price downgrade, can Strategy's "all-in" approach wait for a bull market redemption?

Renowned investment bank TD Cowen has lowered the one-year target price for Bitcoin holdings giant Strategy (formerly MicroStrategy) from $500 to $440, primarily due to its ongoing issuance of equity and preferred shares diluting the key “Bitcoin yield.”

However, the firm still affirms Strategy’s attractiveness as a Bitcoin investment vehicle and forecasts it will increase its Bitcoin holdings by approximately 155,000 coins in fiscal year 2026. Meanwhile, Strategy’s stock has halved over the past year, and its business model’s sustainability has been questioned on Wall Street, but a loyal group of retail investors still regard its founder Michael Saylor as a visionary leader, firmly believing the market has “misunderstood” the company’s value. A tug-of-war over valuation logic and faith is unfolding.

Institutional Perspective: Why Did TD Cowen Cut the Target Price?

The recent report from investment bank TD Cowen has added a new focus to the ongoing discussion about Strategy. Led by Managing Director Lance Vitanza, the analyst team lowered Strategy’s target price for the next 12 months from $500 to $440 in a report issued on Wednesday. This adjustment is not due to a pessimistic view of Bitcoin’s long-term prospects but is based on a more refined financial model—specifically, the expected decline in Bitcoin yield.

For investors unfamiliar with this term, “Bitcoin yield” is a core concept in Strategy’s valuation framework. It does not refer to the price fluctuations of Bitcoin itself but is defined as “the total amount of Bitcoin held by the company divided by the fully diluted total shares.” In simple terms, it measures how efficiently the company accumulates Bitcoin for shareholders without diluting per-share equity. TD Cowen points out that although they expect Strategy to acquire about 155,000 Bitcoin in fiscal year 2026 (significantly higher than the previous forecast of 90,000), its funding will rely more on issuing common and preferred shares, which will directly dilute the Bitcoin per-share rights.

TD Cowen’s Core Forecast and Target Price Adjustment Logic

• New target price: $440 (down from $500)
• Expected Bitcoin accumulation in FY 2026: approximately 155,000 coins
• Expected Bitcoin yield in FY 2026: 7.1% (down from 8.8%, actual FY 2025 was 22.8%)
• Valuation multiple: maintained at 5 times the “Bitcoin USD yield”
• Key concern: equity financing dilutes the Bitcoin value per share

The analyst wrote in the report: “We expect the Bitcoin yield in FY 2026 to decline to 7.1%, which leads us to estimate the ‘Bitcoin USD yield’ decreasing from the original $9.4 billion to $6.315 billion. Keeping the valuation multiple at 5x, we arrive at a new target price of $440.” This calculation clearly reveals the unique perspective institutional investors have on Strategy: it is not just a long position on Bitcoin’s price but a special enterprise whose “production efficiency” can be quantified.

Contrarian Buying: Aggressive Strategy During a Low Stock Price

Despite the target price being lowered, TD Cowen’s report highlights the extremely aggressive strategy of Strategy’s management in the current market environment. The report states that in the week ending January 11, Strategy raised approximately $1.25 billion by issuing about 6.8 million common shares and 1.2 million variable-rate preferred shares (STRC). Subsequently, the company used almost all of the proceeds to purchase 13,627 Bitcoin.

This move occurred during a period when Strategy’s stock price remained depressed, even approaching its net asset value per share (i.e., “Bitcoin premium” near zero). The analyst admitted: “In recent weeks, Strategy’s stock price has almost no Bitcoin premium. If it chooses to slow down its financial operations, that would be understandable. We initially expected it to do so, but Strategy is not. The company is actively taking action, leveraging what many of us see as a temporary Bitcoin price dip.”

This “buy-the-dip” strategy is entirely based on the belief that Bitcoin prices will rebound significantly. Since the recent purchases were mainly funded by issuing shares at near par value, these transactions almost did not generate immediate Bitcoin yield. The analysts believe this move only makes sense if Bitcoin prices rise sharply— and they think that, given increasingly favorable macro and regulatory factors, such a scenario is highly likely. Essentially, it is a high-stakes gamble, exchanging recent equity dilution for a larger asset base when Bitcoin appreciates, with success or failure entirely dependent on Bitcoin’s long-term trend.

Retail Faith: The “Die-Hard” Group Ignoring Wall Street Skepticism

Contrasting sharply with Wall Street’s cold calculations is a large and steadfast group of retail investors. For them, TD Cowen’s target price adjustment is just another piece of “ignorant noise.” They believe “the market has misunderstood Strategy” and regard its founder Michael Saylor as a visionary leader comparable to Elon Musk or Steve Jobs.

Ben Stong, a plastic surgeon from Atlanta, is among them. He first bought Strategy stock in spring 2024. Despite holding a paper loss, he said: “I don’t see the stock price as reflecting the actual value of the stock because the entire market is wrong in pricing Strategy.” He attributes the stock decline to “FUD” (fear, uncertainty, doubt) and sees his investment as a multi-decade plan. Another UK pharmacist who invested £83,000 in Strategy said he admires Saylor and is grateful for his work, even delaying his house purchase because of it.

These retail investors were key early supporters of Strategy’s rise. Initially, they saw it as a convenient tool to leverage Bitcoin’s price increase. Now, during its darkest hour with the stock halved and its business model under serious scrutiny, their faith has evolved into a community and cultural phenomenon. Saylor’s AI-generated image of “taming your bear” posted on X, and the 12-fold surge in resale prices of Strategy-branded sneakers, have transcended financial investment, becoming symbols of identity and belief.

Core Controversy of Business Model: Sustainable Treasury or Leverage Gamble?

All the skepticism Strategy faces ultimately points to the sustainability of its business model. Since 2020, the company has continuously raised funds from the stock and bond markets, all used to buy Bitcoin. This model worked like a perpetual motion machine during Bitcoin’s bull market, with stock and Bitcoin prices mutually boosting each other, creating astonishing wealth effects. However, when Bitcoin enters consolidation or downtrend phases, its fragility begins to show.

The core debate is: Is Strategy a long-term competitive technology company (like its original enterprise software business), or a highly capital-market-dependent “closed-end fund” that leverages Bitcoin’s upward trend? Wall Street worries that if Bitcoin prices remain flat or decline long-term, the company’s ongoing stock issuance will continually dilute existing shareholders, and aside from its Bitcoin holdings, the company lacks other cash-flow-generating businesses to cover operational costs or dividends. Recently, Strategy even raised over $2 billion in cash reserves to pay dividends during market downturns, further highlighting its deep reliance on financing.

Additionally, potential selling pressure from index funds remains a looming threat. Although MSCI recently delayed the removal of Strategy and similar digital asset bond companies from its indices, long-term uncertainty persists. TD Cowen’s analysts sharply pointed out that many of MSCI’s major clients (like BlackRock) are earning huge revenues from spot Bitcoin ETFs and may mistakenly view companies like Strategy as competitors, pressuring MSCI to exclude them. Once removed from mainstream indices, passive fund outflows tracking those indices could cause significant downward pressure on the stock price.

Future Outlook: Waiting for Time to Resolve Divergences

Looking ahead, Strategy’s story is destined to unfold amid significant disagreements. While TD Cowen’s analysts have lowered their short-term target price, they remain constructive on Bitcoin’s long-term price and Strategy’s ultimate prospects. They forecast Bitcoin will reach about $177,000 by December 2026 and approximately $226,000 by December 2027. They expect that as Bitcoin’s price rises, Strategy’s Bitcoin yield in FY 2027 will rebound to 8.1%, improving its valuation outlook. They also see investment opportunities in various preferred stocks within the company’s capital structure, believing they can offer a combination of income and capital appreciation.

For retail “die-hards,” their investment thesis is simpler and more straightforward: they believe Bitcoin’s long-term store of value will ultimately prevail, and Strategy is the most pure and steadfast listed vehicle participating in this transformation. They are indifferent to short-term accounting dilution metrics, focusing solely on the total Bitcoin holdings and Bitcoin’s ultimate price.

The ultimate arbiter of this debate will be time and the market. If Bitcoin’s price follows the optimistic forecasts and a new epic bull market begins within the next two years, all of Strategy’s current equity dilutions will be proven to be visionary capital operations, and its stock price could experience a Davis double. Conversely, if Bitcoin falls into a prolonged bear market, its reliance on continuous financing will face extreme pressure, and the fortress of faith will be severely tested. Strategy stands at a crossroads, its fate both a test of its own business model and, to some extent, a barometer of whether the entire crypto asset industry can be truly understood and accepted by the traditional financial world.