KBW Starts Coverage of Strategy with Outperform Rating, Sees Potential for S&P 500 Inclusion
Investment bank KBW initiated coverage on Strategy (formerly MicroStrategy) with an outperform rating and a $560 price target, noting that the company presents an attractive investment opportunity for those seeking leveraged Bitcoin (BTC) exposure.
As of early trading, Strategy’s stock saw a 1% increase, reaching around $329 per share. According to KBW, the firm, co-founded by Michael Saylor, stands to gain significantly once it adopts the Financial Accounting Standards Board (FASB)‘s updated accounting standards for Bitcoin holdings in the first quarter of this year. The new accounting approach would shift from the current “outdated measurement method” to fair value accounting, with unrealized gains and losses directly impacting net income, analyst Bill Papanastasiou explained.
For the fourth quarter of 2024, Strategy reported a $1 billion impairment loss due to its failure to adopt the updated FASB rules.
One of the key requirements for S&P 500 inclusion is having positive net earnings in the most recent quarter and across the last four quarters. With the FASB changes, Strategy could qualify for inclusion, the report suggested.
Strategy is known for holding the largest Bitcoin treasury among publicly traded operating companies, and KBW noted that the firm has several avenues available to further expand its Bitcoin holdings.
Looking ahead, there is also significant potential for Strategy to generate yield on-chain through applications built on the Bitcoin network, the report added. The development of these applications could lead to a substantial value unlock, as Bitcoin is considered the most secure, decentralized, and valuable public blockchain.
