KBW Begins Coverage of Strategy, Assigns Outperform Rating, Citing Leveraged Bitcoin Exposure.

KBW Begins Coverage of Strategy with Outperform Rating, Highlights Bitcoin Exposure

KBW initiated coverage of Strategy (formerly MicroStrategy) with an outperform rating and a $560 price target, emphasizing the company’s strong position for investors seeking leveraged Bitcoin (BTC) exposure.

In early trading, Strategy shares rose by 1%, reaching approximately $329. According to KBW analyst Bill Papanastasiou, once Strategy adopts the updated Financial Accounting Standards Board (FASB) standards for accounting for Bitcoin in the first quarter of 2025, it will shift from its outdated accounting practices to fair value accounting. This change would result in unrealized gains and losses being reflected in the company’s net income.

For Q4 2024, Strategy reported a $1 billion impairment loss due to not adopting the new FASB rules.

KBW pointed out that one of the key requirements for inclusion in the S&P 500 index is positive net earnings over the most recent quarter and the preceding four quarters. Once Strategy aligns with the updated accounting standards, it could become a contender for inclusion, the report stated.

With the largest Bitcoin treasury among public companies, Strategy has multiple strategies to further grow its Bitcoin reserves, KBW said. Additionally, there’s potential for Strategy to earn yield from Bitcoin-based applications, further boosting its long-term prospects.

The bank also noted that as the Bitcoin network continues to evolve, the development of applications built on it could unlock tremendous value, given Bitcoin’s position as the most secure, decentralized, and valuable blockchain.