Strategy's preferred-stock fix sets up renewed bitcoin buying, analysts say

Strategy (MSTR) fell nearly 10% on Friday following its third-quarter earnings, but Wall Street remains bullish on the leading bitcoin treasury company.

Analysts say Strategy has successfully strengthened its balance sheet and stabilized its preferred-stock financing structure, although the effort came at the expense of near-term bitcoin-per-share growth.

Strategy ended the third quarter with $5.07 billion in dollar assets, including a $4.83 billion cash reserve that covers roughly 3.2 to 3.4 years of preferred dividends and debt interest, according to analyst reports from StoneX and TD Cowen.

The company also spent roughly $2 billion repurchasing its STRC preferred stock, helping restore the shares to near their $100 par value and demonstrating greater resilience in its digital credit financing model. However, Strategy's bitcoin per share declined 3.7% year to date as the company prioritized building cash reserves and supporting its preferred securities over accumulating bitcoin.

Separately, shareholders of Strategy's STRC, STRF, STRK and STRD preferred shares approved a change this week allowing dividends to accrue daily, effective Nov. 1 for STRC and Jan. 1 for the other securities.

"Management said the change was intended to reduce volatility, improve liquidity, broaden demand, and move the instruments in the direction of the tokenized, around-the-clock market that they are anticipating," StoneX analyst Mark Palmer wrote.

Expand Chart

With its preferred-stock financing structure more stable and liquidity substantially improved, analysts believe Strategy is better positioned to resume bitcoin accumulation and grow its bitcoin per share.

"We view these developments as important primarily because deeper distribution and better liquidity could ultimately increase Strategy’s capacity to issue Digital Credit efficiently," TD Cowen analysts wrote. "That, rather than STRC's trading price in isolation, remains the connection to MSTR common-equity holders."

StoneX reiterated its buy rating and $435 price target on MSTR, while TD Cowen maintained its buy rating with a $260 price target.

MSTR traded down 8.7% to $129.90 per share on Friday morning. The stock is down approximately 27% year to date.