Strategy shareholders face dilution drag despite brighter bitcoin forecasts, TD Cowen says

TD Cowen raised its bitcoin forecasts but kept its $260 price target on Strategy (MSTR) unchanged, saying dilution and the company's financial obligations will likely limit upside for its shareholders.

Analysts Lance Vitanza and Jonnathan Navarrete maintained their Buy rating, arguing that higher bitcoin prices should help boost Strategy's earnings potential. However, its preferred-stock repurchases and reserve building could eat into those gains for MSTR holders.

"Capital structure expansion and associated dilution temper the per-share benefit," the analysts wrote in Thursday's report.

Strategy shares fell roughly 2.5% to  $150, leaving them down nearly 5% year to date. The stock has nevertheless recovered from late June through mid-August, when it struggled to break above $100.

TD Cowen's target implies roughly 73% upside from its current price.

More bitcoin against competing claims

Buying more bitcoin doesn't necessarily translate into larger gains for Strategy shareholders, the analysts said. Investors also need to account for the company's debt and preferred shares, including STRC, STRF and STRD, whose holders have claims ahead of common MSTR shareholders.

After factoring those in, bitcoin ownership per MSTR share has been "less robust," TD Cowen said.

Strategy is using some of the money it raises to build cash reserves and support its suite of preferred shares, rather than immediately buying bitcoin. That could help attract investors and fund future purchases, but leaves less money to buy bitcoin today.

Strategy's valuation has recovered to roughly one times net asset value after falling as low as 0.63 in June, according to Saylor Tracker. Its bitcoin holdings, now at an even 848,000 BTC, carry roughly $4.5 billion in unrealized profits.

Brighter bitcoin projections

TD Cowen's updated model puts bitcoin near $109,000 at the end of 2026, and $280,000 by 2029.

That outlook is more bullish than QCP Capital's fourth-quarter base case of $80,000 to $90,000.

Bitcoin was trading near $81,300 on Thursday and remains down 9% year-to-date despite its recent recovery.