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Investing.com -- Monness Crespi Hardt initiated coverage of Strategy (formerly MicroStrategy) with a Neutral rating in a note Wednesday, citing a fair value of approximately $200 per share. 

The firm values MSTR based on a 1.5x multiple to its Bitcoin (BTC) holdings, compared to a historical median of 1.2x and a current level of around 1.8x.

According to the analysts, MSTR’s value is primarily tied to its Bitcoin holdings of roughly 82,000 BTC (~$42 billion), alongside a declining software business worth an estimated $1 billion and a capital markets strategy that caters more to convertible arbitrage than equity investors. 

The firm believes that MSTR has benefited from heightened implied volatility, which fuels the convertible arbitrage trade and allows for equity issuance at a premium to BTC holdings, benefiting existing shareholders. 

However, the firm questions whether this dynamic is sustainable.

"We believe ongoing adoption of BTC by wider investor classes makes it likelier to exhibit declining implied volatility over time," Monness Crespi Hardt wrote. "The augmented implied vol MSTR delivers on BTC HODL will become harder to sustain, impairing MSTR’s ability to export the volatility to convertible arb investors."

Additionally, the firm raises concerns about MSTR’s ability to continue issuing convertibles, noting that the market may be saturated with MSTR notes through early March 2025. 

The analysts also highlight weakness in MSTR’s core business, stating, "Underlying Business Intelligence (BI) software business is shrinking steadily," as it loses market share to cloud-native competitors like Tableau and Power BI.

Monness Crespi Hardt said it would become more constructive on the stock if MSTR narrows the gap between NAV and share price, expands into crypto-related revenue streams, or recaptures market share in its core BI segment.

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