MSTR Stock: Is The 62% Drop A Buying Opportunity Or A Warning Sign

Inside Strategy’s Bitcoin-First Business Model Executive Chair Michael Saylor changed the company’s name to Strategy last year in the wake of its far larger Bitcoin development company business. The BDC model featured borrowing money and selling stock to buy Bitcoin — with current holdings of about 3.2% of the total supply, or more than 672,000 BTC, noted Binance. The value of Strategy’s holdings rose from $1.9 billion in March 2021 to $23.9 billion at the end of 2024, according to The New York Times. Along the way, Strategy’s stock traded at around twice the value of the company’s Bitcoin holdings. In June, the stock began plunging, as did the price of Bitcoin, which hit nearly $124,000 last October and has lost 27% of its value — “when President Trump’s trade tussle with China set off a 24 percent spiral for Bitcoin,” noted the Times. Debt, Leverage and Liquidity Risks Strategy’s financial structure could also be far more solid. In the first half of 2025, $8.1 billion in the company earnings were derived from Bitcoin price appreciation, according to S&P research featured in the Times, which added the value of Strategy’s Bitcoin holdings dropped $17 billion in the fourth quarter. Meanwhile, the company owes $21 billion to lenders and preferred shareholders and must pay more than $844 million to investors in the next year, reported the Times. The company’s stock drop also reflects the loss of the premium to the value of its Bitcoin holdings — with the multiplier-to-net asset value falling from more than 2.4 in late 2024 to around 1.1 in January 2026 — due to high share dilution and investor concerns, noted Dow Jones. Finally, Saylor’s statements about the company’s future have been exceptionally bright. In 1998, he predicted a day when “everybody on the planet lives every hour of every day dependent upon our technology,” according to a Forbes report featured by the Times which noted he previously vowed never to sell Bitcoin, which he predicts will hit $13 million by 2045. This raises a simple question: Is Strategy Stock Undervalued? Unless investors think Bitcoin is likely to rise, Strategy stock may be range-bound. Here are two reasons: * Strategy has lost the premium underlying the success of its borrowing and issuing stock to buy Bitcoin. * The transition from financial engineering vehicle to quasi-Bitcoin exchange-traded fund valued at net asset valued makes Strategy’s stock price less likely to outperform Bitcoin. The good news is despite S&P giving the company a junk credit rating, according to the Times, Strategy’s liquidity is not immediately imperiled. That’s because the company has $8.2 billion in unsecured debt, no margin call triggers and 21 months of cash reserves, noted Tradingkey. Moreover, if Strategy stock — currently in the Nasdaq 100 — is added to the S&P 500, its price would likely rise due to capital inflows from S&P 500 index funds. If Bitcoin goes up in value, so will the stock — which analysts see having 153% upside potential at an average price target of $440, according to TipRanks. Why Did Strategy Lose 62% Of Its Value? When considering whether to buy the stock, it helps to examine the reason for Strategy’s 62% stock price drop through a five whys analysis: 1. **Why is $MSTR down 62%?** The stock collapsed primarily because Bitcoin’s price fell about 25% in the fourth quarter, causing a $17.44 billion unrealized loss, according to Reuters. 2. **Why did the stock fall harder than Bitcoin?** The primary reason was investor fear, which slashed significantly the company’s net asset value multiplier from its 2.4x peak. 3. **Why did the premium compress so violently?** The premium fell a result of institutional investor fear that Strategy’s leverage would create a doom loop of selling its Bitcoin holding to raise cash to meet its financial obligations. In addition, more than 100 rivals copied Strategy’s BDC model so the company’s strategy lost its uniqueness. 4. **Why is the company so exposed to this leverage?** Strategy aggressively issued convertible senior notes and equity to buy Bitcoin, which boosted returns during rallies in Bitcoin while amplifying the losses in Strategy stock when the crypto market cooled. 5. **Why does the company take on this risk?** As in many companies, the root cause of the 62% drop in Strategy stock is the person running the place. Saylor switched the company from a steady enterprise software business generating about $125 million in operating cash flow to the leveraged Bitcoin proxy it is today. The key takeaway is this: if you think Saylor can drive up the price of Bitcoin, the stock could rise. Three Scenarios For Strategy Stock Here are three scenarios about what could happen to Bitcoin and $MSTR: * Status Quo (Bitcoin between $85,000 and $100,ooo). In this base case, the stock would likely trade between $150 and $250 a share as the premium to NAV remains compressed while investors wait for a clear trend. * Optimistic (Bitcoin between $100,000 and $150,000). Analysts at Canaccord Genuity and Bernstein have set price targets between $450 and $474, with $MSTR acting as a leveraged long – suggesting the stock could nearly triple from current levels. * Pessimistic (Bitcoin falls below $80,000). Critics like Peter Schiff predict the stock could drop below $100 on a “death spiral” where the company cannot raise cheap capital to buy more coins. Saylor’s narrative abilities will contribute heavily to the trajectory of Strategy’s stock. With a net worth estimated at more than $10 billion on paper and "given nicknames like Captain of the Digital Navy and, more simply, the Messiah,” noted the Times, he has used social media to foretell doom for the U.S. dollar and written “Sell a kidney if you must, but keep the Bitcoin,” he wrote on X. Since Bitcoin lacks inherent value as a currency for those who are not criminals and terrorists, Strategy’s stock price may depend on how many investors continue to take action in response to Saylor’s patter. Editorial Standards Reprints & Permissions LOADING VIDEO PLAYER... FORBES’ FEATURED Video